US crude rises 36 cents, settling at $66.10, as OPEC supply increase appears less certain

Key Points
  • Iraq's oil minister said on Monday that producers should not be influenced by pressure to pump more oil.
  • The comments come after Reuters reported the U.S. unofficially asked Saudi Arabia and other producers to raise output before Washington imposed sanctions on Iran.
  • U.S. drilling activity is at highest level since March 2015, while Russian output rose to 11.1 million barrels per day in early June, Interfax reported.
A truck used to carry sand for fracking is washed in a truck stop in Odessa, Texas.
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The oil markets reversed early losses on Monday, as comments from the Iraqi oil minister cast doubt as to whether the Organization of the Petroleum Exporting Countries would decide to boost output at its upcoming meeting.

U.S. light crude ended Monday's session up 36 cents at $66.10. Benchmark Brent crude rose 3 cents to $76.49 a barrel by 2:29 p.m. ET.

For 18 months, OPEC and its allies have curbed production in the hopes of stabilizing markets and supporting prices. The group is set to meet June 22-23 in Vienna and decide how to move forward with its supply curb policy against the backdrop of tumbling Venezuelan production and looming sanctions against Iran, the third-largest OPEC producer.

"Last week, we saw some news stories indicating that the Trump administration had asked OPEC to increase oil production. But the week went out and we saw those stories walk back. And now we're seeing a number of OPEC producers who are in favor of the status quo," said Andrew Lipow, president of Lipow and Associates in Houston.

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Iraq's oil minister said on Monday that producers should not be influenced by pressure to pump more oil. Jabar al-Luaibi said that oil prices still require support and stability, and producers "should not over-exaggerate" the oil market's need for more supplies.

According to a statement, the minister also "rejects unilateral decisions by some oil producers without consulting the rest of the members" of the OPEC and non-OPEC producers who took part in the reduction agreement.

The comments by OPEC's second largest producer come after Reuters reported that the U.S. government had unofficially asked Saudi Arabia and some other oil producers to raise output a day before Washington imposed new sanctions on Iran.

Luaibi's remarks appear to signal a schism within OPEC, said John Kilduff, founding partner at energy hedge fund Again Capital

"The discord that's become apparent now in a very public way is really helping to boost prices up here," he told CNBC.

Top oil exporter Saudi Arabia has told OPEC that it raised oil output to a little more than 10 million barrels per day (bpd) in May, a source familiar with the matter said, but still within its agreed target.

Expect additional US oil production to hit the export market: Analyst

Even as OPEC trims output, production from non-OPEC members is rising.

"Non-OPEC supply is expected to rise sharply in 2019, led by U.S. shale growth, along with Russia, Brazil, Canada and Kazakhstan," U.S. bank JPMorgan said.

Russian news agency Interfax said on Saturday that Russia's oil output had risen to 11.1 million bpd in early June, up from slightly less than 11 million bpd for most of May and above its target output of under 11 million bpd.

The number of new rigs drilling for oil in the United States rose by one last week to 862, its highest since March 2015, data from energy services company Baker Hughes showed.

That suggests U.S. crude output, already at a record 10.8 million bpd, will climb further.

"Oil fundamentals are expected to weaken in 2019 on the back of stronger-than-expected non-OPEC supply, but also the potential release of barrels from OPEC as the joint accord between OPEC and non-OPEC is unlikely to stay in place," JPMorgan said in its quarterly outlook.

— CNBC's Tom DiChristopher contributed to this story.