London — Brent crude futures eased on Tuesday, giving up early gains, as investors weighed the chances that global supply will increase substantially if oil cartel Opec decides to raise output, just as US production grows at near-record rates.
Brent crude futures fell 11 US cents to $75.18 a barrel by 9.24am GMT, having lost 2% the previous day. US West Texas Intermediate crude edged up 30c to $65.05.
“[The output decision] is going to be the main event of the month and the main input for the second half of the year, so any change in Opec policy is a big event,” Petromatrix strategist Olivier Jakob said.
Fund managers this year racked up a record bet on a continued rise in oil prices, but the sustained increase in US shale production and now the prospect of higher Opec supply have prompted many investors to pare those positions.
The premium of the Brent 2018 December futures contract over the December 2019 contract has shrunk by a third in a month to around $3.74 a barrel as investors became less bullish.
Opec meets in Vienna on June 22 to decide whether the group and nonOpec producers, including Russia, should raise output to make up for any supply shortfall from Iran and Venezuela.
“It’s all about supply, whether it’s Opec raising output or the US increasing production. All roads lead to higher global oil supplies, which is leaving oil traders shaking in their boots,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.
Global oil supply has tightened with the Opec-led production cuts that began in early 2017.
Crude stocks in the US, the world’s biggest oil consumer, were forecast to have fallen about 2.5-million barrels on average in the week ended June 1, according to five analysts polled before the release of weekly inventory reports.
But increasing US production has put pressure on prices.
In March, US crude output rose to 10.47-million barrels per day, the highest on record, according to the government’s Energy Information Administration (EIA).
The American Petroleum Institute, an industry group, releases data on last week’s US oil inventories at 8.30pm GMT on Tuesday. The EIA report is due at 2.30am GMT on Wednesday.