Oil to decline over growing supplies and trade concerns  

Saudi Arabia expects to augment crude output to record levels where it was producing over 11 Mbps in November. The country is preparing to increase its ability to meet global demand. 

The minister of energy, Khalid Al Falih, said an investment of $20 bn will be made and 1m to handle the spare capacity. EIA expects the crude output from the US to increase to an average of 12.45 million BPD in 2019. 

The production growth is greater than previous assessments, where the country will overtake Russia and Saudi Arabia to become the largest producers following the shale revolution. The increase will support the US as a leading petroleum and related liquid asset supplier. 

Globally, supplies declined in the last few months as the value crashed in the last quarter, where major companies in the sector spent 16 per cent more towards drilling in the last year. Saudi has the world's largest spare capacity, which can raise it significantly. 

Earlier, the amplification programs were launched in 2012, and in 2018, resolving some technical issues increased the ability from the offshore Manifa field. It also holds a half-share in the zones with Kuwait, where the offshore Khafji field was closed in October 2014.  

Value to decline over increasing supplies 

With the US and Saudi Arabia preparing to increase their capability to meet the Chinese demand created by Iran sanctions, the supplies are expected to grow, where the floor price of Brent is predicted to be at $70 a barrel. 

However, the price declined to $60.74 on Tuesday and is expected to hit lower levels of $50 to $59. Currently, the market is well supplied, with uncertainty over the prices in the Middle East.   

On Wednesday, the US sanctions against Iran and Venezuela tightened the supplies, where the crude exports from these countries increased in April by 10.64 million barrels per day, which shows an increase of 11 per cent from last year's same month.  

Iran said it will defy the sanctions and continue to export. The US sanctions on Venezuelans led to supply disruptions, and the decision of OPEC to cut output created tightening. OPEC is expected to meet in June in Austria to determine future export policies. 

There were reports of increased American tariffs on China, which indicates intensifying trade issues and raises market volatility. China is one of the largest importers, wherein in the first four months, it imported 10.03 million BPD – which is almost 8.9 per cent up from last year's data. 

Oil remained at its lowest on 7 May 2019 amidst doubts about US-China trade agreements, where the American stockpiles hit a 19-month high. The stocks were at their highest since September 2017, and with the new additions in the last week, they are expected to grow further.