Friday, 20 April, 2018

Oil jumps 3% to above $65 on growing Middle East tensions

WTI Crude Oil Weekly May WTI Crude Oil
Heather Davidson | 11 April, 2018, 12:41

Brent crude's three year plus high came as geopolitical concerns in the Middle East - coupled with easing US-China trade tension, a weaker dollar and a small decline in forecasts for US oil production - saw the oil bulls emerge after being battered on Friday.

US West Texas Intermediate (WTI) crude futures were at $62.34 a barrel at 3.55am GMT, up 28c, or 0.45%, from their previous settlement.

Brent crude futures were at $67.42 per barrel, up 31 cents, or 0.5 percent.

In physical oil markets, OPEC's number two producer Iraq said on Monday that it is keeping prices for its crude supplies in May steady.

Concerns of a prolonged trade dispute between the world's two biggest economies and uncertainty over the supply and demand balance of global oil markets have made for volatile trading in the last few weeks.

US crude inventories rose by 1.8 million barrels in the week to April 6 to 429.1 million, according to a report by the American Petroleum Institute (API) on Tuesday, compared with analysts' expectations for a decrease of 189,000 barrels.

The U.S. Energy Information Administration said it expected domestic crude oil production to rise by 750,000 barrels per day (bpd) to 11.44 million bpd next year, more than previously expected.

"If China was to impose counter tariffs on USA crude, it would become quickly very heavy for the US supply and demand picture, resulting in US crude oil price pressure that would have a negative impact on global oil prices", according to Petromatrix.

Departures from the accord would result in renewed sanctions against Iran, which would hurt its oil industry.

Turning to data, unofficial figures from the American Petroleum Institute suggest that both crude and gasoline stocks were higher last week (the consensus expected stocks to keep falling).

"In addition to the risk of protectionism, there has been a significant change in the Trump administration that has raised risks of potential sanctions on key oil exporting countries including Iran, Venezuela and Russian Federation", U.S. bank JPMorgan said.

Monthly oil reports are also due out from the Organization of the Petroleum Exporting Countries on Thursday and the International Energy Agency on Friday.

The Saudis want oil prices near $80 to help support the valuation of Saudi Aramco ahead of its IPO, Bloomberg reports.

However, soaring USA crude production, which has jumped by a quarter since mid-2016 to 10.46 million barrels per day (bpd), is threatening to undermine OPEC's efforts to tighten the market and prop up prices.

JPMorgan said it expects Brent and WTI prices to average $69.50 and $65.20 per barrel in 2018, respectively, while it forecasts $64 per barrel for Brent and $58.50 per barrel for WTI in 2019.

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