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Crude Rises as OPEC is Riven by Dissension Over Relaxing Curbs

Bloomberg logoBloomberg 6/12/2018 Jessica Summers

(Bloomberg) -- Crude advanced as resistance grows within OPEC to curtailing historic output limits.

Futures in New York rose 0.4 percent on Tuesday to the highest in more than a week. Early-session losses predicated on Saudi Arabian and Russian willingness to pump more oil were erased as Iraq, Iran and Venezuela closed ranks to oppose such moves.

“The market is kind of re-thinking their concerns over OPEC trying to ramp up production, especially given the problems in Venezuela and Iran,” said Rob Haworth, who helps oversee $151 billion at U.S. Bank Wealth Management in Seattle. Given that some cartel members are having trouble even fulfilling their quotas, the specter of unwinding the caps is “not as bearish a scenario as some may have thought.”

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Citigroup Inc. said a boost by the group’s four main producers is “inevitable,” with such a move reviving about 500,000 barrels a day of halted output. The debate has raged as OPEC on Tuesday emphasized deep uncertainty over the strength of demand for its crude.

There’s a “wide forecast range” for how much crude OPEC needs to pump in the second half of the year, its research department wrote. With a range of uncertainty of 1.7 million barrels a day, demand could either be significantly higher, or slightly lower, than OPEC’s current output.

West Texas Intermediate crude for July delivery added 26 cents to settle at $66.36 a barrel on the New York Mercantile Exchange. Total volume traded was about 24 percent below the 100-day average.

See also: OPEC likely to agree production increase next week, survey shows

Brent futures for August settlement slipped 58 cents to end the session at $75.88 on the London-based ICE Futures Europe exchange. The global benchmark traded at a $9.60 premium to WTI for the same month.

Meanwhile, U.S., crude stockpiles probably fell 1.25 million barrels last week, according to a Bloomberg survey ahead of the release of Energy Information Administration data on Wednesday. At the same time, inventories at the biggest U.S. storage complex in Cushing, Oklahoma, decreased by 900,000 barrels last week, according to a forecast compiled by Bloomberg.

The industry-funded American Petroleum Institute will release its weekly tally of inventories later on Tuesday.

--With assistance from Tsuyoshi Inajima and Grant Smith.

©2018 Bloomberg L.P.

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