Last month, Saudi Arabia and Russian Federation agreed to increase production and the USA continues to produce at record levels, however, unless there is a drop in demand, it appears we are headed toward a supply deficit later this year.
President Donald Trump has again lashed out at an global body - this time, it's the Organization of the Petroleum Exporting Countries (OPEC), which he accused Wednesday afternoon of driving up gas prices.
Foreign ministers from the five remaining signatories of a nuclear deal between Tehran and world powers will meet Iranian officials in the Austrian capital to discuss how to keep the accord alive after the USA withdrawal from the pact.
"If Libya's oil doesn't return fast to the market it will be an important test to OPEC's spare capacity, especially given that output from Venezuela and Iran is expected to fall significantly in the next couple of months", he added. He also called on the United States to join world powers in a meeting with Iran in Vienna on Friday.
"With Trump not backing off on Iran sanctions, lot of geopolitical risk is there on crude oil and 1mpbd of Iranian crude oil production could be lost to the market". Many coutries have not committed to the United States ban, and if prices rise, Iran may ultimately take in just as much money even with fewer exports. By withdrawing from the deal, America reimposes economic sanctions on Iran, impacting Tehran's ability to sell its oil on the market.
Brent crude was trading at 78.05 a barrel at 4pm UAE time on Tuesday. "He has agreed", Trump tweeted on June 30.
"There are indications that Iranian oil exports have already begun dropping during the first half of June, mostly to Europe".
Crude prices ended slightly higher on Tuesday after a volatile session in which the USA benchmark passed $75 a barrel for the first time in more than three years before turning negative and later recouping its losses. Analysts and traders were predicting a draw of 1 million barrels.
He said oil sector contracted by 1.6 per cent past year mainly because of the Opec mandate that saw the UAE cut its oil production by 150,000 barrels per day from an average of 3.09mbpd in Q4 2016 to an average of 2.89m in Q4 2017, representing a drop of almost 6.4 per cent.
Apart from Iran, Venezuela, Libya and Angola are also facing chronic production issues.
Saudi Arabia now produces about 10 million barrels of oil per day. "If production increases as we now forecast, a large share of this would be eroded, leaving the global oil market with a limited "margin of safety", said Morgan Stanley's Rat.
An International Energy Agency scenario projects oil production falling by around 1.5 million bpd due to the loss of Iranian and Venezuelan oil.