IEA cuts oil demand forecast

Oil hits high

Oil hits high

The IEA said the previous round of sanctions, which were lifted in early 2016, cut Iran's crude exports by more than 1 million bpd.

The agency added that developing nations that phased out fuel subsidies when prices were lower are especially sensitive to the high prices; it also noted that the "effect of higher prices should in particular become apparent in gasoline demand in the next few months".

OPEC thinks non-OPEC oil supply will grow at 1.72 million bpd year-on-year in 2018.

There are several ways to play higher oils prices.

"For WTI, while it is under performing at this point, it is not by any means bearish for the US benchmark", said Flynn.

Oil fell on Wednesday ahead of an anticipated rise in United States crude inventory that could provide more evidence that demand may be slowing in spite of ongoing crude output cuts by producer group Opec and imminent U.S. sanctions against Iran.

Is $100-$3.60 per gallon gasoline in the US -or higher possible? The demand for OPEC's crude for 2018 is 32.7 Mbd, based on the cartel's estimates, but current production is lower at 31.9 Mbd-bringing the deficit to about 800,000 b/d. There is one big difference now, of course-shale's massive growth.

USA crude stockpiles slipped for a second week as the summer driving season approaches, government data showed on Wednesday.

Oil hits high

At the same time, China's domestic crude oil production has been languishing near June 2011 lows in the first quarter this year, prompting higher imports to meet growing demand. With Saudi Arabia signaling that it wants prices in the $80-100 range, the kingdom's ambitious goals of its initial public offering and social spending are distorting OPEC's strategy.

Shortly after the U.S. announcement, Saudi Arabia acknowledged the need to work with producers and consumers to mitigate possible supply shortfalls.

It did not rule out price hikes, due to potential production disruptions in Iran and Venezuela.

"For now, the rapidly changing geopolitical landscape will move the attention away from stocks as producers and consumers consider how to limit volatility in the oil market", the agency stated. Other OPEC officials, meanwhile, have expressed complacency.

Despite Wednesday's dips and some indicators implying the financial oil has overshot physical oil, overall crude market conditions have tightened since 2017 when the Organization of the Petroleum Exporting Countries (OPEC) started to withhold supplies to push up oil prices.

A surge to triple digits is not guaranteed, of course.

Asia's demand is at record highs and with rising prices its crude could cost $1 trillion this year, about twice what it paid during the market lull of 2015/2016.

Surging prices were capped after China reported weaker-than-expected investment and retail sales in April and a drop in home sales, clouding its economic outlook even as policymakers try to navigate debt risks and defuse a heated trade dispute with the United States.


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