United States Oil Fund LP (ETF)(NYSE:USO): Oil Drops On Supply Fears

Energy ETFs Plunge as OPEC Looks to Higher Production

The apprehension in India was that OPEC countries, including export leader Saudi Arabia, had persistently denied rising production to offset a price spiral.

Prices of the American benchmark for the sweet light crude oil are sharply lower at the end of the week, taking the barrel to the mid-$68.00s area, or 2-week lows. The cuts came as the global benchmark capped its first weekly drop since early April, sliding below $80 a barrel after Saudi Arabia and Russian Federation said OPEC and its allies may boost oil output in the second half of the year.

Brent crude futures slipped 23 cents to settle at $79.80 a barrel, while US crude lost 36 cents to $71.84 a barrel.

Global oil prices fell Friday after top producer Saudi Arabia signalled a likely boost in supply as soon as the third quarter, and world stock markets were mixed over the sudden USA move to cancel the summit with North Korea. -North Korean détente and word of more oil from OPEC members helped push crude oil prices down sharply in early Friday trading.

"The resumption of consumer hedging and backend buying after several years" is pushing up long-dated oil prices, said Amrita Sen, chief oil analyst at consultants Energy Aspects Ltd in London.

"The spectre of USA oil sanctions on the embattled Latin American producer now looms large as Washington strives to tighten the financial noose", PVM Oil Associates strategist Stephen Brennock said in a note. The price of a barrel of Brent crude was down by more than 1.6 per cent to $78.22 at one point yesterday. However, Russia's Energy Minister Novak declined to comment on the same, saying that all proposals will be discussed in June's Vienna meeting. I think the question is, do I need a lot of oil on the market? He noted that the glut in commercial inventories was "almost gone" and that the buffer of spare production was still relatively small, an ominous situation when geopolitical risks remain high.

OPEC may decide to raise oil output as soon as June due to worries over Iranian and Venezuelan supply and after Washington raised concerns the oil rally was going too far, OPEC and oil industry sources familiar with the discussions told Reuters.

Non-OPEC oil producers such as Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, and South Sudan agreed to reduce output by 558,000 barrels per day starting from January 1, 2017.

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