Oil prices started the week lower on Monday, amid continued uncertainty over when OPEC and its allies will begin to ramp up output, alongside fresh signs of burgeoning U.S. production.
Brent crude LCOQ8, -1.30% , the global oil benchmark, was down $1.13, or 1.4%, to $75.65 a barrel on London’s Intercontinental Exchange. On the New York Mercantile Exchange, West Texas Intermediate futures CLN8, -0.61% were trading down 47 cents, or 0.7%, at $65.37 a barrel.
“Market participants would like more clarity out of OPEC” about raising its crude production, said Giovanni Staunovo, commodity analyst at UBS Wealth Management.
Brent has lost roughly 5% since the end of May on news that Saudi Arabia — the de facto head of the Organization of the Petroleum Exporting Countries — and Russia were nearing a deal to pump more crude. The potential decision to raise production after more than a year of holding back output was prompted in part by increased geopolitical risks to supply in Iran and Venezuela — two OPEC members.
Brent last month breached the symbolic $80 a barrel threshold for the first time since November 2014, largely on the back of President Donald Trump’s decision to pull the U.S. out of a 2015 international agreement to curb Iran’s nuclear program. The decision sets the stage for the reimposition of economic sanctions that are expected to hinder the Islamic republic’s oil exports.
In May, banks raised their forecasts for oil prices for the eight month in a row, amid those escalating geopolitical risks. Brent is now expected to average over $70 a barrel this year, according to a poll of 12 investment banks surveyed by The Wall Street Journal. West Texas Intermediate, the U.S. standard, should average nearly $66 a barrel, the poll showed. Both estimates are a roughly $6 increase on the forecast from April’s survey.
OPEC and 10 producers outside the cartel, including Russia, have been cutting crude output by roughly 1.8 million barrels a day since the start of 2017. The coordinated effort, which is set to expire at the end of this year, has helped to boost crude prices by more than 40%.
“The prospect of OPEC and Russia expanding their oil production in the second half of the year is prompting speculative financial investors to withdraw further,” according to analysts at Commerzbank.
Prices have also come under pressure, following data released last week by the U.S. Energy Information Administration that showed U.S. crude production has risen to a record weekly high of 10.47 million barrels a day. At the same time, the number of rigs drilling for oil in the U.S. — a proxy for activity in the sector — was up by two last week, to 861, according to Baker Hughes.
Analysts and investors are looking ahead to the EIA’s short-term energy outlook, due out Tuesday.
Among refined products Monday, Nymex reformulated gasoline blendstock RBN8, -1.03% — the benchmark gasoline contract — was down 1.2% at $2.11 a gallon. July heating oil HON8, -0.81% fell 0.9% to $2.155 a gallon, while July natural gas NGN18, +0.34% added 0.5% to $2.955 per million British thermal units.