Oil prices fall on dip in China demand, surging US output

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The European Commission announced yesterday it endorsed a decision to impose duties on imported USA goods in response to US President Donald Trump's move on aluminum and steel tariffs.

"This is occurring because of the rapid increase in production from USA shale coupled with the tightening of supplies elsewhere through the actions of OPEC and Russian Federation", said William O'Loughlin, investment analyst at Australia's Rivkin Securities.

The Organization of the Petroleum Exporting Countries meets in Vienna on June 22 to decide whether the group and non-OPEC producers, including Russian Federation, should raise output to make up for any supply shortfall from Iran and Venezuela. USA production according to the latest report from the Department of Energy has increased to 10.8 million barrels per day. Iran is the third-largest oil producer in OPEC after Saudi Arabia and Iraq. The surplus in gasoline comes amid higher year-over-year consumer fuel prices and a long USA holiday weekend. United States crude oil production hit another record last week at 10.8 million barrels per day (bpd).

Iran would benefit less than Saudi Arabia from an increase in supplies if it can not raise output, as well as receive a lower price for existing production.

"No one in OPEC will act against two of its founder members", he said. Analysts had expected a drawdown of about 2 million barrels for the period.

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In December 2016, at a meeting of oil producers in Vienna, 11 non-OPEC member countries agreed to cut oil production by a total of 558,000 barrels a day.

Three sources familiar with the matter said a senior USA administration official had called Saudi Crown Prince Mohammed bin Salman before Trump's announcement to make sure Washington could count on Riyadh, the de facto OPEC leader. When the U.S. announced it would reimpose sanctions on Iran in November, Ice Brent futures rose by $2.36/bl on the day. Demand growth has been such that the United States and Canada the main sources of new supply replacing lost output from Opec and its partners are now hitting physical export constraints.

Iran's OPEC governor Hossein Kazempour Ardebili asked the chairman of the OPEC board to include a sanctions debate on the agenda for the June 22 talks, according to a copy of Kazempour's letter dated June 2 and seen by Reuters. PVM Oil Associates strategist Tamas Varga said, Reuters reported.

Oil prices have advanced since the Organization of Petroleum Exporting Countries and allied producers began cutting output in January 2017 to drain a global glut.