Published: Tue, May 08, 2018
Money | By Ethel Goodwin

Oil exceeds USA $70 in the United States by tension with Iran

Oil exceeds USA $70 in the United States by tension with Iran

Another factor that could keep oil prices in check, particularly in the USA, is the higher domestic shale production, predicted by the Energy Information Administration to reach close to 11 million barrels a day in the month of May.

Crude at US$60 to US$65 a barrel is "suitable", an Iranian official said on Sunday, signaling a split with fellow OPEC member Saudi Arabia, which is said to be aiming for US$80 oil.

WTI Crude Oil at 70.18 is up, and could head to 71-72 soon. According to an analysis by USA oil security monitor SAFE, Chinese consumers purchased 10 million SUVs in 2016, a 25 per cent increase over 2015 levels. It powers everything that we use every day. Output dropped to 1.50 million bpd in April, the survey found, a new long-term low.

If the United States covers the incremental new oil demand, we're left with the problem that stocks have been drawn down at a rate of 800,000 barrels per day, and it doesn't appear that OPEC and Russian Federation combined can lift production by that amount unless the decline in Venezuelan production is arrested.

Iran re-emerged as a major oil exporter in January 2016 when global sanctions against Tehran were suspended in return for curbs on Iran's nuclear program.

A firming US dollar has also been negative for some commodities, with gold falling for a third straight week before bouncing slightly on Monday to $1,315.12 an ounce. The increases came despite nine US oil rigs bringing the total count to 834, energy services firm Baker Hughes said in a news release.

West Texas Intermediate oil for June delivery edged up 6 cents to $69.78 a barrel on the New York Mercantile Exchange at 9:01 a.m.in Singapore.

Brent crude, the global benchmark, has benefited greatly from ongoing geopolitical risks, with the US-versus-Iran standoff as well as an ongoing collapse in Venezuelan production attracting most of the attention. The WTI discount is a boon for refineries, particularly in Asia, that need the light sweet crude which yields higher priced refined petroleum products. US inventory data has weighed the market down, limiting the upside, he said.

The price of oil has crossed $70/barrel and the trend is upwards. Unipec executives have said previously that such prices increases were "unreasonable".

Trump has all but chose to withdraw from the accord by May 12, sources said on Wednesday, though exactly how he will do so remained unclear. A rally in equities also pulled oil higher. The yield on the 10-year Treasury held at 2.95 percent. Iran's oil exports could credibly be curtailed by 200,000-300,000 bpd, ' RBC Capital Markets analyst Helima Croft said in a note. One source, according to a report in Hellenic Shipping News, said that of the 25 million barrels expected to land in May, 15 million barrels had already been placed with end-users. According to a Reuters report, the current backwardation in Brent is the most extreme it has been in more than 25 years, putting it in the 91st percentile of all trading days since 1992.

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