Excess crude account swells as oil price leaps towards $80

Marcus Newton
May 15, 2018

"Iran jitters helped push oil prices higher but a broader stabilization of crude futures near 3½-year highs can be tied to several big, prevailing trends", according to CNBC.

The revised demand growth predictions come at a time when the global crude market is also facing other significant supply-side question marks, such as the impact of the imposition of United States sanctions on Iranian output and the ongoing struggles of the Venezuelan oil sector.

The surge in oil prices comes at a time of tight supply amid record Asian demand and voluntary output restraint by the Organisation of the Petroleum Exporting Countries and non-OPEC producers, including Russian Federation.

"Geopolitical concerns, tightening product inventories and robust demand provided support for prices", OPEC said in the filing.

"The commitment of Saudi Arabia and the rest of OPEC to the production cuts is a major factor in supporting the price at the moment as well as the possibility of reduced exports from Iran due to sanctions", said William O'Loughlin, investment analyst at Rivkin Securities.

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Oil prices steadied below 3-1/2 year highs yesterday as resistance emerged in Europe and Asia to USA sanctions against major crude exporter Iran, while rising US drilling pointed to higher North American production. However, the cartel also revised higher the non-OPEC supply forecast by 10,000 barrels per day, which does not come as a surprise given the rising U.S. oil output.

The tightening market has just about solved the global supply overhang that has weighed down oil prices between 2014 and 2017.

The West Texas Intermediate for June delivery rose 0.26 USA dollar to settle at 70.96 dollars a barrel on the New York Mercantile Exchange, while Brent crude for July delivery rose 1.11 dollars to close at 78.23 dollars a barrel on the London ICE Futures Exchange.

OPEC data presented on Monday showed that crude stockpiles from members of the Organization for Economic Co-operation and Development (OECD) was down to 9 million barrels above the 5-year average and lower than the 340 million barrels above the average in January 2017.

Other reports by MaliBehiribAe

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