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The price of oil inches towards $80 a barrel

17 Mai 2018

Warenemy/DreamstimeThe price of West Texas Intermediate (WTI) crude oil rose from just over $30 per barrel in February 2015 to fluctuate around $50 per barrel over the next few years. U.S. Midwest refinery utilization rates increased last week to 96 percent of capacity, the highest since at least 2010 seasonally. However, it's reported that prices for black gold may soar even higher, as an agreement between the Organization of the Petroleum Exporting Countries (OPEC) and other major producers, including Russian Federation, to slash output is still helping to reduce supply. Any news, analysis, opinion, price quote or any other information contained on Forex Crunch and permitted re-published content should be taken as general market commentary.

Judging by the many new oil bulls popping up in media these days, you'd think that everyone would be reading Energy and Capital. Current crude exports from Iran are around 2.6 million barrels per day; over one million barrels higher than the 1.5 million exported under the sanctions imposed by Barack Obama in 2012. Gasoline and distillate stocks were expected to have fallen by 2 million barrels and 1.3 million barrels, respectively.

Over the same timeframe, oil supply increased in Africa, Latin America, the Former Soviet Union and Asia Pacific countries that are members of the Organisation for Economic Co-Operation and Development (OECD). Thus far, only a meager 70 tick daily range has been established in the wake of mixed API and EIA crude oil stocks reports. Inventories fell 1.4 MMbbl, while domestic production rose to 10.7 MMbpd, the EIA said. Distillate production averaged over 5 million barrels a day last week, roughly flat compared to the prior week's production.

Trump has withdrawn the United States from the Trans-Pacific Partnership trade pact, effectively empowering China; has been the only nation to pull out of both the Paris climate accord and the Iran nuclear deal; and has threatened Washington's closest allies with a series of debilitating tariffs.

June WTI Crude Oil Futures, Daily Chart
June WTI Crude Oil Futures, Daily Chart

The bottleneck in North America likely contributed to a 4.9 million barrel rise in US crude oil inventories, to 435.6 million barrels, that the private American Petroleum Institute reported on Tuesday. The feedback/reflexivity here (that results from a price maker/entity with market power using spreads/inventory as a proxy for supply-demand balance, and market participants forming expectations about how the price maker will behave) greatly complicates things. "The strong global demand for WTI will keep us supported, and even if some of the global risks get reduced, WTI will benefit from the unwinding of the Brent versus WTI spread that is reflecting most of the geopolitical risks".

The IEA said the previous round of sanctions, which were lifted in early 2016, cut Iran's crude exports by more than 1 million bpd.

Rig counts have predictably risen and output is up, but both US tight oil and the Alberta tar sands are facing an infrastructure squeeze.

The agency estimates that global oil inventories fell an average of almost 0.6 million barrels per day (bpd) in each of the past five quarters (January 2017 through March 2018).

The price of oil inches towards $80 a barrel