Oil supported by Iran sanction fears, holds near 2014 highs

The production growth may be far from over, contributing to USA crude´s discount to Brent, analysts said.

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

The oil price spread that'll determine the type of crude bought by Asia in the wake of USA sanctions on Iran is now in favor of American supply. US West Texas Intermediate (WTI) crude futures were at $71.02 a barrel, down 29 cents, or 0.4 percent, from their last settlement.

In its monthly oil market report the IEA lowered its estimate for growth in world oil demand this year to 1.4 million b/d, from 1.5 million b/d due to higher oil prices.

World oil prices have surged more than 70 percent over the a year ago as demand has risen sharply while production has been restricted by the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, and other producers, including Russian Federation.

Elsewhere, supply concerns have been mounting over the last week after President Donald Trump the USA pulled out of the Iran nuclear deal - a move that reimposes sanctions on Iranian barrels.

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

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

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).

However, experts are of opinion that the market may get some clarity and things may ease out a bit after a review meeting in June by Organisation of Petroleum Exporting Countries (Opec) and non-Opec in which they may take the decision whether to continue with cut in oil production as was pledged earlier or pump out more to make up for any shortage.

Despite these downward forces, the market retains support from OPEC and other producers' production cuts and USA sanctions on Iran.

In 2017, China surpassed the United States to become the world's top crude oil importer as its domestic production declined while it kept the title of world's largest oil consumer for the ninth consecutive year, and while it expanded refining capacity, and reduced restrictions on oil imports and refined oil product exports.

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

(Copyright © 2015. All Rights Reserved.)
 
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