Oil falls as investors brace for output increases

Oil prices fall as supply from top three producers set to rise

USA and global benchmark oil prices diverged on Tuesday, with concerns about a potential rise in oil supply pulling West Texas Intermediate crude down for a fifth straight session.

While oil futures have been pushed lower in recent days by the prospect of increased production, the USA benchmark has fallen more of late than Brent.

Credit Suisse analysts on Tuesday said even if Russian Federation and OPEC producers raise output, they would likely only add an additional 500,000 bpd, which would leave inventories in the most developed countries short of the five-year average by the end of 2018. We have seen upside risks to oil prices rise substantially over the last few months.

Additionally, ongoing disruptions in economically fragile OPEC member Venezuela and potential losses from fellow group member Iran because of renewed USA sanctions on the Islamic Republic are likely to partially offset this higher supply, the bank said.

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But even if Asia and Europe are keen to take more USA crude, the record volumes are straining export infrastructure in the United States, limiting its ability to pump and ship more oil.

Heightened geopolitical risks and market fears of a looming supply shock pushed oil prices to their highest level in May in almost four years.

US oil production has surged by more than 27 percent in the last two years to 10.73 million barrels per day (bpd). "Bekri expressed his support for Saudi Arabia's efforts and other major producers to stabilize the oil market".

The sides started withholding supplies a year ago to tighten the market and prop up prices, which in 2016 fell to their lowest in more than a decade to less than $30 per barrel.

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"Structurally there shouldn't be enough pressure on the market to take us back into that very high-priced world", said Andrew Slaughter, an energy expert and executive director at consulting firm Deloitte Services LP.

But now, there is hope for us as the top 3 crude oil producers in the world, America, Russia and Saudi Arabia are thinking about scaling up their production to match the demand.

"The regulation will send demand for middle distillates such as diesel and marine gasoil soaring, and refiners will have to shift some of the products they will be processing from crude oil", said Oilprice.com quoting analysts.

OPEC may decide to raise oil output as soon as June due to worries over Iranian and Venezuelan supply and after Washington raised concerns the oil rally was going too far, OPEC and oil industry sources told Reuters on Tuesday. Baker Hughes reported an oil rig count increase of 15 last week. US crude CLc1 was up 40 cents at $67.13.

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