Tuesday, 22 May, 2018

Iran and Venezuela Could Keep Oil Elevated

Demand growth slows non-OPEC supply increases as prices climb.

 Oil inventories below average for first time since 2014 IEA Demand growth slows non-OPEC supply increases as prices climb. Oil inventories below average for first time since 2014 IEA
Preston Stone | 17 May, 2018, 17:59

Crude traders who peddle cargoes to refineries worldwide say speculators are on shaky ground as they drive futures markets above $70 a barrel, their highest levels for three-and-a-half years, on concerns about tighter supply from Venezuela and the potential impact of US sanctions on supply from Iran.

The price of Brent crude oil - the global benchmark - hit $80 per barrel for the first time since late 2014 on Thursday morning as the commodity's rapid price growth in 2018 continues unabated. West Texas Intermediate crude rose 26 cents to settle at $70.96.

But that benign view had not taken account of President Trump's decision to rip up the Iran nuclear deal and, as a result, to reinstate sanctions, a move that will take place in two phases to give firms time to adjust.

Crude inventories fell by 1.4 million barrels in the week to May 11, compared with analysts' expectations for a decrease of 763,000 barrels.

EIA believe that crude oil prices have probably been driven higher for three reasons: falling global oil inventories, heightened market perceptions of geopolitical risks, and strong global economic growth signals.

OPEC's supply cuts have been swamped by the increase in U.S. output, led by production from shale fields and this, along with the higher price, has made the major forecasting agencies - the IEA, OPEC itself and the U.S. Energy Information Administration - far more cautious.

Oil hits high
OPEC compliance reaches record 172%

OPEC figures published on Monday showed oil inventories in OECD industrialized nations in March fell to 9 million barrels above the five-year average, from 340 million barrels above the average in January 2017.

Oil market supply deficit to average approximately 800,000 b/d in 2018.

The oil price has climbed above $80 a barrel for the first time in three-and-a-half years amid simmering global tensions over Iran.

United States crude exports jumped by 689,000 b/d last week to 2.566 million b/d, a record high, leading to a draw in crude stocks, Energy Information Administration data showed Wednesday. An exected drawdown is United States stockpiles could see WTI break higher once more.

Contrastingly, OPEC's latest report was more bullish.

“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, ” the IEA said. China's refinery runs rose almost 12 percent in April from a year earlier, to around 12.1 million barrels per day, marking the second-highest level on record on a daily basis, data showed. "It would be extraordinary if such a large jump did not affect demand growth". OPEC's sometimes-unruly members have even over-delivered on their promised cuts: as of last month, they were trimming their production by 63% more than they had promised, according to the World Bank. "Oil stocks fell across the board and in some cases more than expected, whilst rising exports point to healthy demand for USA crude", Commerzbank analyst Carsten Fritsch said.

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