Oil prices dropped due to an increase in US crude inventories and the prospect of a rise in OPEC production since 2016 to offset concerns of reduced supply from Venezuela and Iran.
Benchmark Brent LCOc1 futures dropped by 59 cents to touch $79.21 a barrel, while US crude futures CLc1 fell 41 cents to reach $71.43 a barrel, reported Reuters.
Commerzbank strategist Carsten Fritsch was quoted by the news agency as saying: “This discussion about possible OPEC supply increases after the June meeting has put a brake on the oil price for the time being, so $80 is a big hurdle to overcome.
“If prices get above there, that will further intensify and increase the likelihood that OPEC will do something. It’s going to be very difficult to overcome this level on a sustainable basis before the OPEC meeting.”
In June, OPEC may plan to increase oil production to make up the shortfall as a result of reduced production from Iran and Venezuela, OPEC and oil industry sources told the news agency.
The supply concerns had pushed both Brent and WTI to cross the $80 threshold last week, which is the first time since late 2014.
CFD and FX provider AxiTrader chief market strategist Greg McKenna said: “The chat is still that OPEC will do something at its June meeting in reaction to the looming prospect of a fall in crude production and exports from both Iran and Venezuela as the year progresses.”
OPEC had previously agreed to reduce their production by about 1.8 million barrels per day to cut down supply glut and increase prices.
Commercial US crude inventories C-STK-T-EIA grew by 5.8 million barrels in the week to May 18, while analysts expected a drop of 1.6 million barrels, according to the Energy Information Administration (EIA).