Oil markets firm amid OPEC cuts, Iran sanctions

15 May, 2018, 22:41 | Author: Brooke Harris

Yet, the biggest story in oil markets this year may well take place far from the much-publicized tensions in the Middle East - namely China's ever-growing oil demand.

The OPEC report, published Monday, showed Venezuelan production at its lowest in decades and said the global oil glut had been virtually eliminated.

The so-called Saudi Vision 2030 is aimed at generating more growth from the non-oil sector. Total global demand is now seen at 98.85 million bpd. Production rates are strong, but so too are US demand and fuel exports.

Markets were also held in check by a rise in US drilling for new oil production.

Mousavi, whose NIOTC is tasked with controlling Iran's oil export facilities, went on to say that Iran now had no oil stored in its tankers, which means that the Islamic republic goes on selling its oil reserves, with exports as of March 2017-2018 hitting roughly 800 million barrels, IRNA reported.

In the first four months of this year, South Korea's intake of Iranian oil dropped 34 percent to 4.69 million tonnes, or 286,308 bpd, versus about 7.1 million tonnes over the same period a year ago, the data showed.

The report is the last one before the oil ministers' meeting in Vienna to discuss the oil production ceiling two weeks later.

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The Saudis themselves reported total production of 9.868 million barrels a day in April, down by about 39,100 compared to March.

Some oil analysts have said they expect Iranian crude exports to fall by as little as 200,000 barrels per day (bpd), while others put the figure closer to 1 million bpd. Steady refining margins and backlog cargoes to some independent refiners contributed to the record import volumes.

"In the short term, higher oil prices will probably be sustained", said John Velis, macro strategist at State Street Global Markets, noting multiple reasons for the price support.

- Global oil supply is tightening.

Oil held near $71 a barrel on heightened political risks in the Middle East following unrest in Gaza and the return of sanctions against Iran.

But it is unclear how hard the sanctions will hit Iran's oil industry. As a result, crude oil is likely to undergo a short-term correction. Crude oil prices moved up during European trading hours and continued to rise during U.S. trading hours.

"Plus we see a high likelihood of OPEC working with Russian Federation in 2019 to set a floor on oil prices", analysts wrote in their report.

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