Khalid A. Al-Falih, Saudi Arabia's Minister of Energy, Industry & Mineral Resources and Chairman of the JMMC (r); with HE Mohammad Sanusi Barkindo, OPEC Secretary General - Photo by OPEC

JAKARTA (TheInsiderStories)Oil prices fell on Wednesday (06/06) trading over concerns of rising global supplies after US inventories rose unexpectedly, as well as Saudi Arabia and other major producers hinted at plans to increase production.

West Texas Intermediate (WTI) crude oil prices for July 2018 shipments in Nymex-US closed down 1.20 percent to U$64.73 a barrel on Wednesday, according to Bloomberg, while Brent crude oil future market fell to US$75.26 per barrel. In post-settlement trading, Brent prices rebounded slightly by US$ 0.18 per barrel.

As the rate of decline in US crude oil prices faster than Brent, the difference between them widened by 6.5 percent to US$ 10.74 per barrel compared to the previous session.

Yesterday, surprisingly, US oil inventories reported an increase by 2.1 million barrels in a week ended June 1, 2018, according to the US Energy Information Administration (EIA). The gasoline inventories also rose by 4.6 million barrels beating analysts’ projection of a decline by 1.8 million barrel.

The US oil production increased by 10.8 million barrel per day last week, while domestic oil export fell by 465,000 barrels per day.

The US inventories increase give pressure to the oil price which had already dropped after the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC oil producers sought to raise output. Russian Energy Minister Alexander Noval met Organization of the Petroleum Exporting Countries (OPEC) leader Saudi Arabian Energy Minister Khalid al-Falih in St. Petersburg, Russia in the end of May to discuss a potential increase in oil output by 1 million barrel per day to compensate the falling production in Venezuela and potential disruption of oil exports from Iran.

OPEC and non-OPEC ministers will meet in Vienna on June 22-23 to take the final decision about the oil production hike. However, it is unclear which countries are able to raise production.

This increase of production will end 17-months of supply control amid concern that price rally has gone too far at US$80.50 per barrel earlier in May, the highest since 2014. The production cut implemented since 2017 to boost the oil price that touched below US$30 per barrel in 2016. In an agreement earlier this year, OPEC and Russia agreed to continue production cuts of 1.8 million barrel oil per day by the end of the year.

Even though oil price record dropped in recent days, it still far above the 2018 state budget assumption of US$48 per barrel. Finance Minister Sri Mulyani earlier said an increase by US$1 per barrel in oil price could raise state revenue by Rp1.1 trillion. With the current price of US$80 per barrel, Indonesia is highly likely to surpass the current oil & gas revenue target of Rp83.5 trillion. It consists of Rp80.3 trillion tax revenue and Rp3.2 trillion of non-tax revenue.