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Oil Plunges As OPEC Decides Whether to Increase Supply

May 25, 2018 at 12:30 by Matt Jackson

OPEC nations have been propping up oil prices by restricting the amount they supply to market, but in the aftermath of recent concerns over supply from Iran, Venezuela, and even Syria, it has been suggested that the likes of Saudi Arabi and Russia will increase their supply to meet the shortfall. With supply concerns having been priced into the market, the recent suggestion that these concerns may not come to fruition, has led to oil prices plunging by around 2% on Friday.

The Iran deal has understandably taken up the majority of headlines in recent weeks. US President, Donald Trump, withdrew from the existing deal, and he also threatened the reintroduction of fresh sanctions against the world’s fifth largest oil supplier. Trump withdrew because he said that the deal was insane and did not benefit the USA. Since withdrawing, oil prices have continued to increase as news of fresh sanctions has circulated.

Venezuela produces around half of the level of oil as Iran, but with total supply limited, it is still considered an important supplier. Following the controversial re-election of President Nicolas Maduro, many nations, including the USA and UK, have suggested that economic sanctions will be imposed against the country. This also helped increase oil prices over the last week.

These proposed sanctions against two oil producing countries has seen oil prices experience significant gains in the past few weeks, but reports have surfaced suggesting that OPEC, and especially Saudi Arabia, will increase its supply to overcome any shortfall experienced. With increases already built into oil prices, this news has pushed prices down.

Finally, on Wednesday, the USA’s International Energy Agency reported a significant and unexpected increase in crude stockpiles, and with greater supply comes price reductions. The end result means that Friday trading has seen a lot of the gains previously made by oil, diminished.

WTI crude has fallen 2.23% to $69.13 while Brent crude fell 2.28% to $77.03 at 13:30 GMT.

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