Oil prices dropped due to a potential increase in OPEC output to cover any deficits in supply from Iran and Venezuela.

Brent crude LCOc1 futures dropped by 75 cents to reach $78.82 a barrel while US crude CLc1 dipped by 46 cents to reach $71.74 a barrel.

So far this year, oil prices have increased nearly 20% with Brent price even going beyond $80 due to output cuts by OPEC and its partners such as Russia.

The geopolitical tensions as a result of US plans to impose sanctions on major oil producer Iran and economic crisis in Venezuela would lead to a supply shortfall.

According to International Energy Agency, demand is set to reach 100 million barrels per day in the last quarter of this year.

“We still have the unquantifiable impact of US sanctions against Iran.”

To meet this demand, OPEC may decide to raise oil output as soon as June.

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By GlobalData

Due to uncertainty over how sanctions might impact Iranian supply, fund managers in the last seven weeks have reduced their holdings of crude futures by more than 10%, the lowest level this year.

Saxo Bank senior manager Ole Hansen was quoted by the news agency as saying: “It does seem like any move above $80 attracts selling interest right now and that could potentially lead us to a period of consolidation, where I think $77.50 or even $75 might be in focus.

“We still have the unquantifiable impact of US sanctions against Iran.”