Oil Prices Rebound On Crude Inventory Draw

18 May, 2018, 15:24 | Author: Roderick Gutierrez
  • Oil hits high

However, going forward if crude oil prices remained high or the average price goes up over $80 to a barrel, then it might become hard for the government manage the macros. They were up 58 cents at $79.86 as of 1110 GMT.

Crude has been trading at their highest levels since November 2014 due to a combination of output cuts by OPEC and other major producers, except the United States; strong demand amid the global growth recovery; as well as the heightened geopolitical tensions in the Middle East.

Natural-gas prices, meanwhile, turned modestly higher.

U.S. President Donald Trump's decision to exit an worldwide nuclear deal with Iran and revive sanctions on the OPEC member country, as well as Venezuela's plummeting output, has helped to lift oil prices to their highest since 2014. The OPEC Reference Basket of Crudes (ORB) is made up of the following: Saharan Blend (Algeria), Girassol (Angola), Oriente (Ecuador), Zafiro (Equatorial Guinea), Rabi Light (Gabon), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (UAE), and Merey (Venezuela).

"Production is holding back West Texas Intermediate", said John Kilduff, partner at Again Capital in NY.

"There was no new catalyst today, no new rhetoric from key players".

Trump on 8 May announced the USA decision to withdraw from what he views as a "defective" pact, noting that the sanctions to be re-imposed are targeted at critical sectors of Iran's economy, such as energy, petrochemical and financial sectors.

"That showed that he's not kidding around. If that shortfall there coincides with a large shortfall in Iranian exports as the sanctions are implemented that potentially poses a challenge", he added.

Oil hits high
Geopolitics Trumps Oil Market Fundamentals: IEA

With renewed USA sanctions looming against OPEC-member Iran and oil demand strong, analysts said crude prices were well supported.

US President Donald J. Trump announced that he will impose sanctions on Iran over its nuclear programme, raising fears that markets will face shortages later this year when trade restrictions take effect.

The US decision to reimpose sanctions on Iran could scare off European investors but oil-thirsty China may step into the void and ramp up business links with the country.

"With trade skirmishes between the U.S. and China and all kinds of political issues, I see the resistance from Chinese crude buyers to comply" with United States sanctions, he said.

Iran is a major producer and exporter of Group I base oils and counts the UAE and India as major export markets.

"The screws are really tightening on Venezuela", Dan Yergin, vice chairman of IHS Markit, told CNBC Wednesday.

US crude output has soared 27 percent in the last two years to a record 10.72 million barrels per day, putting it within reach of top producer Russia's 11 million bpd.


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