Oil jumps on Venezuela export concerns

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File image of oil drums

File image of oil drums

SINGAPORE/TOKYO - Global oil prices rose during Asian trade on Wednesday after Venezuela raised the prospect of halting some crude exports, according to people familiar with the matter, but gains were capped amid reports the US government had asked Saudi Arabia and some other OPEC producers to increase output.

Falling production from Venezuela has contributed to a rally in global oil price Brent to nearly $80 a barrel. State firm PDVSA is considering declaring force majeure on some exports, three sources told Reuters, amid plummeting output from its oil fields and tanker bottlenecks at ports.

READ: Brent oil rises above $80 for first time since 2014

Brent crude rose 27 cents to $75.65 a barrel by 0412 GMT after dropping to its lowest since 8 May on Tuesday. US West Texas Intermediate (WTI) crude futures were up 29 cents at $65.81 a barrel, having touched a near two-month low on Tuesday.

The Organisation of the Petroleum Exporting Countries and Russia will meet on 22-23 June to decide how much production they will increase as global inventories have tightened while Venezuela’s production has dropped more than expected. US sanctions on Iran are also threatening to reduce oil exports from the OPEC producer.

The United States government has weighed in on the decision by putting in unofficial requests to Saudi Arabia and some other OPEC producers to increase output, sources said on Tuesday.

READ: Oil hits new multi-year high on tight supply

“At the moment, the oil price is being driven by OPEC and views on how much and how quickly OPEC plus will raise output,” Energy Aspects analyst Virendra Chauhan said.

Reuters reported on 25 May that the producers were considering a supply increase of 1 million barrels per day, with a final decision to be made at the June meeting in Vienna.

WTI’s discount to Brent narrowed 4 cents to $9.88 a barrel after industry data showed US crude inventories fell by 2 million barrels, compared with analyst expectations for a decrease of 1.8 million barrels, American Petroleum Institute data showed.

Investors are waiting for the official inventories report to be issued by the US Energy Department’s Energy Information Administration at 1430 GMT.