Wednesday, 18 July, 2018

Oil dips on signs of ample supply despite OPEC cuts, Iran sanctions

Oil dips on signs of ample supply despite OPEC cuts, Iran sanctions Oil dips on signs of ample supply despite OPEC cuts, Iran sanctions
Stacy Diaz | 16 May, 2018, 15:59

With renewed USA sanctions looming against OPEC-member Iran and oil demand strong, analysts said crude markets will likely remain tight for much of the year.

Global benchmark Brent gained $1.11 to settle at $78.23 a barrel.

"The potential double supply shortfall represented by Iran and Venezuela could present a major challenge for producers to fend off sharp price rises and fill the gap, not just in terms of the number of barrels but also in terms of oil quality", it said. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.5% at $71.33 a barrel.

Moreover, in a monthly oil market report released Monday, the Organization of the Petroleum Exporting Countries (OPEC) raised its forecast for global oil demand in 2018, expecting the world to consume 98.85 million barrels a day, or 1.65 million barrels a day higher than past year.

The tightening market has all but eliminated a global supply overhang that depressed crude prices between late 2014 and early 2017.

Refinery runs in March also jumped to a record as import quotas for the small independent refiners-the so-called "teapots"-were increased and refinery margins stayed healthy".

Crude demand is now expected to increase by 1.4 million barrels per day, down from the previous prognosis of 1.5 million bpd, as a price rise of around 75% since last June to the current level of about $77 per barrel for Brent crude is expected to impact consumption.

On the other hand, US production is growing at a pace that made traders hesitate last week after Baker Hughes reported yet another increase in drilling rigs.

In a monthly report issued Monday (https://www.eia.gov/petroleum/drilling/#tabs-summary-2), the Energy Information Administration said crude-oil production from seven major USA shale plays is expected to see a climb of 144,000 barrels a day in June to 7.178 million barrels a day.

"A rising oil price brings upside price risk to all commodities", Morgan Stanley said in a note this week.

Global oil supplies could be hit by the decision by the U.S. to pull out of the Iran nuclear deal, and also by falling production in crisis-hit Venezuela, the IEA said on Wednesday.

A lower US benchmark price could make American crudes attractive in Asia.

This story has not been edited by Firstpost staff and is generated by auto-feed.