Crude oil prices have increased more than $10/bbl this year, boosted by tensions in the Middle East and they could increase further following the Trump administration's withdrawal from the Iran nuclear agreement, according to analysts at Nomura. As a result, crude oil is likely to undergo a short-term correction. "Oil prices could rise at least $10 (a barrel), with Brent approaching near $90", Akuta said.
- Strong domestic gasoline demand has caused reduced supply levels.
Traders are concerned that renewed sanctions could lead to a loss of crude oil exports from OPEC's third largest producer. Historically, the negative consumption response dominated the increase in oil investment.
Brent crude was up 20 cents at $77.32 a barrel by 1315 GMT and USA light crude rose 10 cents to $70.80.
"Around a million barrels of oil a day is likely to disappear from global oil markets if the US sanctions on Iran bite", said Greg McKenna, chief market strategist at futures brokerage AxiTrader.
The oil prices has become steady at $71 as OPEC signaled that it has the ability to fill in the supply gap only if US sanctions are curtailed from shipments from Iran, which is the third largest producer of this group. The global benchmark crude traded at a $6.34 premium to July WTI.
All key crude oil futures contracts saw traded volumes jump as speculators took on new positions in the hope of profiting from rising prices while refiners hedged to protect themselves from higher feedstock oil prices.
"The oil supply/demand balance is roughly in balance now, but it could turn to a complete supply shortage (in case of new supply curbs)".
Despite the International Atomic Energy Agency verifying Iran's adherence to the agreement, numerous reports anticipated Trump would not waive sanctions, plunging Iran's cautious re-entrance to the energy market into deep uncertainty, along with global prices carefully monitored by the Organization of the Petroleum Exporting Countries (OPEC), of which Iran is a member.
In China, the world's biggest oil importer, refinery runs rose almost 12 percent in April compared with the same month a year ago, to around 12.06 million barrels per day, marking the second-highest level on record on a daily basis, data showed on Tuesday.
OPEC has an adequate "buffer" of potential production to offset barrels lost from a re-imposition of Iranian sanctions, he said in an interview with Bloomberg Television.
President Donald Trump ordered the federal government to significantly reduce the amount of petroleum and petroleum products purchased from Iran. Prices dropped 66c to $70.70 on Friday.
The group, along with Russian Federation and several other producers, has been limiting its output since January 2017 in order to drain a glut of oil that caused a historic price crash.