An oil well is seen near Denver, Colorado. Picture: Reuters
An oil well is seen near Denver, Colorado. Picture: Reuters

London — Oil prices steadied on Thursday, but were likely to remain under pressure on evidence of rising US output and uncertainty over the outlook for supply before a key meeting of the world’s largest exporters next week.

Brent crude futures were last up 6c at $76.80 a barrel by 9.15am GMT, while US West Texas Intermediate (WTI) crude futures were up 12c at $66.76 a barrel.

"At oil cartel Opec’s meeting in a good week’s time, Saudi Arabia apparently plans to make several proposals that all boil down to increasing production on a one-off or gradual basis by between 500,000 and 1-million barrels per day (bpd)," Commerzbank analysts said in a note. "Iran has already signaled it will resist any such attempts and blames the US for the price rise. According to sources close to Opec, Venezuela and Iraq are also not in favour of raising production."

Opec meets on June 22 in Vienna to discuss its own supply policy, then again on June 23 with rival producers, such as Russia and Oman.

For the last month, the oil price has successively marked lower intra-day highs and lows, indicating that traders and investors are not quite as confident in the outlook for the supply-demand balance, especially given the steep rise in US crude production and the splintering within Opec.

US crude output has risen almost 30% in the last two years to 10.9-million bpd, and is now close to top global producer Russia, which churned out 11.1-million bpd in the first two weeks of June, and above top exporter Saudi Arabia, which produced slightly more than 10-million bpd. But the rising output was met by strong demand, which traders said prevented prices from falling further.

US consumption of petrol rose to a record 9.88-million bpd last week, according to the EIA.

U.S. crude inventories fell by 4.1-million barrels, to 432.4-million barrels.

Fifa World Cup

The surge in US output puts pressure on other producers, which are losing market share. Russian and Saudi production has been held back voluntarily since 2017, when Opec, together with non-Opec producers, started supply cuts of 1.8-million bpd to prop up prices.

With Brent prices up by about 180% from their 2016 lows and demand strong, Opec and Russia may soon end their voluntary supply cuts. Opec’s effective leader Saudi Arabia, and Russia, will also have the chance to talk before the Vienna meeting.

Russia and Saudi Arabia are set to open the football World Cup tournament, which starts in Russia on Thursday.

PVM Oil Associates strategist Tamas Varga said, "The topic will surely come up between President [Vladimir] Putin and the Saudi Crown Prince Mohammad bin Salman as they watch their countries’ teams in today’s opening game of the football Fifa World Cup together in Moscow’s Luzhniki stadium."