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losangelesnewstoday.com May 20, 2018


Oil dips on signs of ample supply despite OPEC cuts, Iran sanctions

16 May 2018, 12:39 | Katrina Lee

Oil dips on signs of ample supply despite OPEC cuts, Iran sanctions

Oil dips on signs of ample supply despite OPEC cuts, Iran sanctions

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

Brent crude oil reached an intraday peak of $79.47 a barrel, up $1.24 and its highest since November 2014, before retreating to $78.70, up 47 cents, by 1:12 p.m. EDT (1712 GMT).

West Texas Intermediate crude for June delivery was 15 cents higher at $71.11 a barrel on the New York Mercantile Exchange as of 11:36, after rising 26c on Monday.

The supply is greater in the U.S. were production has now seen a large increase in production bringing the total of barrels produced per day to 10.7m.

Foreign ministers from the UK, France and Germany will meet with their Iranian counterpart, Javad Zarif, to discuss salvaging an accord that allows Iranian oil exports, after the USA withdrew last week. "Brent is pricing in the idea that all the risk to supplies is overseas - there's a concern that all the supplies that are tight in Europe are only going to get tighter".

The surge in oil prices comes at a time of tight supply amid record Asian demand and voluntary output restraint totaling 1.8 MMBPD by the Organization of the Petroleum Exporting Countries and non-OPEC producers, including Russian Federation.

Now the United States has announced it will impose sanctions on Iran over its nuclear program, raising fears that markets will face shortages later this year when trade restrictions come into effect.

Iran will restart its uranium enrichment if it can not find a way to save the 2015 nuclear deal with the European Union after the United States pulled out last week, Tehran's government spokesman said on Tuesday.

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

Data from China's refineries showed that in April, these processed some 12.06 million barrels of crude daily, up 12 percent on the year and also the second-highest daily throughput rate on record, Reuters noted.

Demand for oil drastically increased prices and has resulted in oil prices increasing by more than 70 per cent over the previous year. As the dollar strengthens, investors can retreat from dollar-denominated commodities like oil.

It is unclear how hard United States sanctions will hit Iran's oil industry.

OPEC, for its part, estimated that the excess oil inventories in the OECD had shrunk to just 9 million barrels.

"Germany has said it will protect its companies from US sanctions, Iran has said French oil giant Total has yet to pull out of its fields and all the while it seems the Chinese are ready to fill the void created by the U.S".

Rosneft's total average daily hydrocarbon production was at 5.71 million barrels of oil equivalent in the first quarter, close to levels in the same period past year.



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