Oil Trades Near $71 as Rising Supply Counters Middle East Risk

How will the Iran deal collapse impact crude prices

The IEA said that the overall market balance was "continuing to tighten", and it lowered its estimate for 2018 global oil demand growth to 1.4 million barrels per day from its previous estimate of 1.5 million.

Brent crude rose to $80 a barrel in London for the first time since 2014 on Thursday.

"I expressed my concern about rising prices of crude oil and its negative impact on consumers and the Indian economy and reiterated the need for stable and moderate crude oil prices", Pradhan said.

Chief Executive Officer of Total Patrick Pouyanne has predicted that the price of a barrel of crude will hit $100 later this year.

Total warned on Wednesday it might have to abandon a multi-billion gas project on Iran if United States sanctions go ahead. US light crude was 60 cents higher at $71.56 a barrel, also close to its highest since November 2014.

"The geo-political noise and escalation fears are here to stay", said Norbert RŶcker, Head of Macro & Commodity Research, at Swiss bank Julius Baer.

Global inventories of crude oil and refined products dropped sharply in recent months due to robust demand and production cuts by the world's top producing countries.


Additionally, the market retreated as the U.S. Dollar strengthened against other currencies to the highest since December.

US crude inventories (USOILC=ECI) fell by 1.4 million barrels in the week to May 11, compared with analyst expectations for a 763,000 barrel decrease.

More so, member states of the Organisation of Petroleum Exporting Countries (OPEC) have overtime implemented a resolution that ensured reduced crude output, a move that ultimately reduced global oil inventories and spiked prices. This makes sense since the USA sanctions against Iraq are likely to lead to some supply disruption although we may not see the full impact of the supply reductions until November.

"While the economic environment will continue to support oil demand. support from harsh weather conditions will vanish and the recent jump in oil prices will take its toll", it said.

On the flip-side, however, high oil prices could hit consumption, the International Energy Agency warned on Wednesday as it lowered its global oil demand growth forecast for 2018 to 1.4 million barrels per day (bpd) from 1.5 million bpd.

Iran is OPEC's third-largest crude producer and its output now stands at about 3.8m barrels per day, making up around 4% of global oil supply.

Senior market analyst Fiona Cincotta at City Index said that although the increased U.S. production is putting pressure on the oil prices, they are now overshadowed by the lack in production from both Iran and Venezuela.

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