Oil Surges Above $80 Amidst Iran Concerns

18 May, 2018, 14:14 | Author: Brooke Harris
  • Gold Hourly

Crude has rallied this month on concern that President Donald Trump's decision to quit an worldwide accord with Iran and reimpose sanctions will strain global supplies just as markets begin to show signs of a tightening. West Texas Intermediate, the USA benchmark, was down 0.67 percent to $70.83 per barrel.

"When we backed out of the Iran Nuclear Deal that took about 500 to 800 barrels a day, roughly, off the market initially, and so that created about a $5 lift on the Brent Oil Crude Prices, about $2 to $3 lift on USA prices in the last five days on that", said Eugene Graner, Heartland Investment Services President. "We continued to receive support from concerns about supply from the Iranian nuclear accord, Venezuela.as well as the draw in crude", McGillian said.

"The geopolitical noise and escalation fears are here to stay".

The IEA expects 2018 supply growth from non-OPEC countries to rise by 1.87 million barrels a day, up by about 70,000 and more than double the 700,000 barrel-a-day growth in 2017.

"While the sharp rise in USA production and rig count has raised questions on the sustainability of inventory draws through 2018, we believe that inventories will continue to draw as we enter the summer driving season in 2018", they said.

There is now a concern that because of the decrease in supply and Opec choosing to cut production by 1.8m barrels per day until the end of 2018, the prices could continue to increase to as much as $100 per barrel within the next few years.

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The price growth was prompted by the recent cuts from the Organization of Petroleum Exporting Countries and the consequences of the U.S. decision to withdraw from the Iran deal and to re-impose sanctions on the Islamic Republic, which could also affect the European companies working there.

The U.S. Commerce Department on Tuesday said consumer spending increased marginally last month, noting that higher gasoline prices were eating away at discretionary spending.

The International Energy Agency said oil inventories in the developed world had already dipped below the five-year average, a measure targeted by OPEC and its allies.

Goldman Sachs, though, said even with a slowdown in demand and soaring US output, global oil markets would remain tight.

"The potential double supply shortfall represented by Iran and Venezuela could present a major challenge for producers to fend off sharp price rises and fill the gap, not just in terms of the number of barrels but also in terms of oil quality", it said.

World supply, meanwhile, rose 1.78 million bpd in April from a year earlier, driven predominantly by non-OPEC production.

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