Crude Oil Prices Defy Forecast, Hit $78.18

Source U.S. Energy Information Administration Short Term Energy Outlook May 2018

Source U.S. Energy Information Administration Short Term Energy Outlook May 2018

West Texas Intermediate, the US marker, is $3.21 a barrel below Middle East benchmark Dubai.

West Texas Intermediate crude rose 26 cents to settle at $70.96.WTI´s discount to Brent was as much as $7.28, its widest since December 12 on surging USA output.

"In Venezuela, the pace of decline of oil production is accelerating and by the end of this year output could have fallen by several hundred thousand barrels a day", the IEA said.

Spot crude oil cargo prices are at their steepest discounts to futures prices in years as sellers are struggling to find buyers for West African, Russian and Kazakh cargoes, while pipeline bottlenecks trap supply in west Texas and Canada.

"You have the threat that a high enough price will start to activate the 7,700 drilled but uncompleted wells in the Lower 48 states", said Walter Zimmerman, chief technical analyst at ICAP TA.

Oil prices fell on Wednesday, weighed down by ample supplies despite ongoing output cuts by producer cartel OPEC and looming U.S. sanctions against major crude exporter Iran.

The recent decision by US President Donald Trump to withdraw from the Iran nuclear agreement has raised fears that renewed sanctions by Washington could severely hit production from the Middle East state, which now produces 3.8 million bpd and exported 2.6 million bpd last month - making it Opec's third-largest supplier.

Source U.S. Energy Information Administration Short Term Energy Outlook May 2018
Source U.S. Energy Information Administration Short Term Energy Outlook May 2018

Elsewhere, supply concerns have been mounting over the last week after President Donald Trump the USA pulled out of the Iran nuclear deal - a move that reimposes sanctions on Iranian barrels.

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

The data poses worries that near-record high refinery runs may be short-lived.

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. As the dollar strengthens, investors can retreat from dollar-denominated commodities like oil. Concerns over the impact of U.S. re-sanctioning on Iran apart from other factors like economic crisis in Venezuela are keeping the oil prices high.

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.

The Secretary-General, Organisation of the Petroleum Exporting Countries (OPEC), Mohammed Barkindo, attributed the rising oil prices to efforts by OPEC and non-OPEC countries to rebalance the market through production freeze.

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


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