A group of OPEC and non-OPEC producers have been voluntarily withholding supplies since January 2017 to tighten markets, but with crude prices up by more than 40 per cent since then and markets significantly tighter, there has been pressure on producers to raise output.
Oil prices could soon rise above $80 a barrel as American sanctions on Iran move closer, Venezuelan production falls and Libyan supplies face disruption, the International Energy Agency has warned.
Oil markets are also watching Hurricane Florence offshore the United States, amid surging demand for gasoline and diesel, although crude output will not be affected on the storm's current route, according to CNBC. Furthermore, Iranian oil exports continued to decline before the US sanctions go into effect in November to provide an additional boost to oil.
"Oil cut earlier losses and rose towards its highest level this year on Wednesday, after a drop in USA crude inventories and as the prospect of the loss of Iranian supply added to concerns over the delicate balance between consumption and production".
"Markets. are expecting substantial price pressure as Iran sanctions loom", said Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA in Singapore.
The Economic Times (ET), an Indian daily said Iran now exports about 2 million barrels a day which is already 28% less than what they used to export in April. Eyes will be on Iranian oil import data from China and India who typically import around 500-700k barrels.
Worldwide oil benchmark, Brent crude, extended its gains on Wednesday, trading near a two-month high as shrinking oil inventories pointed to an increasingly tight global market.
The Russian Energy Minister, Alexander Novak, said on Tuesday that Russia and a group of producers around the Middle East, which dominate OPEC, might sign a new long-term cooperation deal at the beginning of December, the TASS news agency reported. Oil production has been hit by attacks on oil facilities and blockades, though past year it partially recovered to around one million barrels per day.
Total OPEC crude oil production averaged 32.56 million bpd in August, an increase of 278,000 bpd over the previous month, according to secondary sources.
But it said rising demand could also be checked.
EIA revises down USA crude oil output expectations. The IEA said crude output fell in August by 150,000 bpd from July to a 25-month low of 3.63 million bpd, while exports fell by 280,000 bpd to 1.9 million bpd, from a peak of around 2.5 million bpd in May.
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