Iran's weekly light crude price surpasses $77

Future Shock

Rapid oil price increases have an uncanny knack for predicting peaks in the U.S. business cycle

There are no new catalysts behind the price action, traders are still pressing the short side because of concerns over record USA production and worries over a jump in OPEC supplies.

In New York, July West Texas Intermediate crude fell $US1.23, or 1.8%, to settle at $US65.81 a barrel-the lowest finish since April 10.

Brent crude was down 38 cents, or 0.5 percent, at $77.12 per barrel at 0643 GMT, after settling the last session up 2.8 percent.

OPEC and its partners chose to extend its production cuts till the end of 2018 in Vienna on November 30, as the oil cartel and its allies step up their attempt to end a three-year supply glut that has savaged crude prices and the global energy industry.

Last week, the Energy Information Administration said that US crude production rose in March to 10.47 million barrels per day (bpd), a monthly record.

"If there is a more aggressive demeanor with conversation as far as how they may unwind the current agreement", you may see investors "get a little bit more skittish just because you have more oil coming onto the market at the same time that the U.S. has ramped up production", said Mark Watkins, who helps oversee $151 billion at U.S. Bank Wealth Management.

The pricing of WTI and Brent suggest that US crude is now so cheap compared to its main competitor that refiners across the world, but especially in the main consuming region of Asia, should be snapping up vast quantities. "Financially it makes sense for buyers to take WTI as it is so cheap".

USA crude oil refinery inputs averaged about 17.2 million barrels per day during the week ending May 25, or 527,000 barrels per day more than the previous week's average. Surging output and a lack of pipeline capacity in the prolific Permian Basin shale play in Texas is exacerbating swelling US inventories.

Meanwhile in the US, bottlenecks in key shale plays such as the Permian basin are keeping record-breaking levels of output trapped.

United States crude stockpiles fell by 3.6-million barrels last week, the EIA said, exceeding expectations for a decline of 525,000 barrels.

The second-largest fall in May came from Venezuela, whose production declined to 1.45 million bpd from 1.50 million bpd, compared to the implied target of 1.972 million bpd, which means that Venezuela's involuntary "cut" in May was 617,000 bpd-more than the cut pledged and achieved by OPEC's biggest producer Saudi Arabia.

Russian Federation and the OPEC leader Saudi Arabia have signalled there could be a need to gradually boost oil production to prevent any supply shortages.

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