Investing.com - Crude oil prices settled sharply lower Thursday as reports OPEC and its allies were considering scaling back production cuts to counter a possible shortage in global supplies weighed on sentiment.
On the New York Mercantile Exchange crude futures for July delivery fell 1.57% to settle at $70.71 a barrel, while on London's Intercontinental Exchange, Brent fell 0.93% to trade at $79.06 a barrel.
Russian Energy Minister Novak reportedly said Russia would discuss with OPEC in June whether it is appropriate to gradually scale back production cuts as the market was rebalancing at a faster rate than many had expected in the wake of plummeting Venezuela output.
The pending U.S. sanctions on Iran is another risk to global oil supplies that has added $5 to $7 barrels to the price of oil, Novak said.
Novak’s remarks came as traders digested a Reuters report, citing sources, suggesting OPEC may decide in June to ease production cuts amid supply risks and in response to concerns from Washington about higher oil prices.
OPEC and its allies’ strong commitment to the production-cut agreement has seen excess oil supplies slashed to just above the five-year average.
OPEC said in its monthly report released early in May, that oil inventories in developed nations fell to 9 million barrels above the five-year average, down from the 340 million barrels above the average seen in January 2017.
OPEC and its allies are slated to meet in Vienna on June 22.
In November 2016, OPEC and other producers, including Russia agreed to cut output by 1.8 million barrels per day (bpd) to slash global inventories to the five year-average. The OPEC-led deal was renewed last year through 2018.
Oil prices were also nursing losses following the unexpected surge in U.S. supplies last week.
Inventories of U.S. crude rose by 5.778 million barrels for the week ended May 18, confounding expectations for a draw of 1.567 million barrels, according to data from the Energy Information Administration (EIA).