Published: Wed, May 16, 2018
Life&Culture | By Sue Mclaughlin

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

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

However, the tailwinds for crude oil now vastly outnumber the headwinds, so prices will likely continue upwards in the coming days, especially in light of the escalation in Israel following the move of the US embassy from Tel Aviv to Jerusalem that ignited protests in Gaza, prompting an immediate military response from the IDF.

West Texas Intermediate, the US marker, is $3.21 a barrel below Middle East benchmark Dubai.

While it is still unclear how US sanctions will affect output from the third-largest OPEC producer, the move has helped oil prices rise.

However, EIA expects West Texas Intermediate (WTI) crude oil price to average $5/barrel lower than the Brent price this year.

Crude demand is now expected to increase by 1.4 million barrels per day, down from the previous prognosis of 1.5 million bpd, as a price rise of around 75% since last June to the current level of about $77 per barrel for Brent crude is expected to impact consumption.

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.

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

USA dollar climbs on rising Treasury yield
The pound shed 0.2 percent to 1.3469, after recording its weakest level since December 29 of 1.3452 on Tuesday. Japan's gross domestic product (GDP) data did not much have an effect on the safe-haven currency.

"A rising oil price brings upside price risk to all commodities", Morgan Stanley said in a note to clients this week.

The Organization of the Petroleum Exporting Countries reduced its forecast for global oil production in its most recent report.

OPEC figures published on Monday showed that oil inventories in OECD industrialised nations in March fell to 9 million barrels above the five-year average, down from 340 million barrels above the average in January 2017.

The decision by US President Donald Trump to withdraw from the Iran deal "has switched the focus of oil market analysis from the fundamentals to geopolitics", the International Energy Agency wrote in its regular monthly report.

China, which is the world's biggest importer of oil, saw refinery runs rise 12 per cent in April compared to the same time past year to about 12m barrels of oil per day.

This story has not been edited by Firstpost staff and is generated by auto-feed.

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