Brent crude oil prices fall further on OPEC production pledge

June 25 (UPI) — The price for Brent crude oil was under pressure Monday after OPEC hinted at more production, though a lack of spare capacity could be a factor.

Brent, the global benchmark for the price of oil, continued its downturn from Friday after members of the Organization of Petroleum Exporting Countries solidified a decision to ease compliance with a multilateral production control effort. Supported in part by chronic production challenges in Venezuela, compliance last month was close to 150 percent.

Moving compliance to 100 percent adds a theoretical 1 million barrels per day to the market in the second half of the year. That’s eased concerns about further market deficits triggered by Venezuela and the possible loss of Iranian oil from the market when U.S. sanctions snap back in November.

Brent was down 1.73 percent as of 9:15 a.m. EDT to $74.02 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, was up 0.89 percent to $69.19, supported by an outage on a Canadian pipeline in the oil-rich province of Alberta.

Saudi Arabia, the de facto head of OPEC, is one of the few countries in the world that has extra capacity to buffer against any market shocks like hurricanes in the U.S. Gulf of Mexico, conflict in Libya or tighter U.S. sanctions on OPEC members or Russia.

According to a report emailed to UPI from Swiss financial services company UBS, the lack of spare capacity means the future for the oil market is uncertain.

“Price setbacks are likely to be short lived due to the low spare capacity and reduced oil inventories,” the report from commodity analyst Giovanni Staunovo read. “We reiterate our forecast that Brent oil prices will rise to $80-85 per barrel in the second half of 2018.

U.S. President Donald Trump, whose country is a major oil producer in its own right, has expressed concern about a high price of oil. Higher oil prices lead to higher prices on retail fuels and could offset the benefits of a temporary tax break for U.S. consumers.

Brent crude oil prices may be under additional pressure from escalating global trade tensions. Trump in a weekend statement on his Twitter account said countries imposing trade barriers and tariffs on U.S. imports will “be met with more than reciprocity” from the United States.

Tariffs on global trade could dampen the trajectory for recovery, particularly if tensions erupt into an all-out trade war between the United States and China, the world’s leading economies.