Crude Oil Prices Defy Forecast, Hit $78.18


Crude Oil Prices Defy Forecast, Hit $78.18

Carla Harmon
May 16, 2018

With renewed US sanctions looming against OPEC-member Iran and oil demand strong, analysts said crude markets will likely remain tight for much of the year.

The difference between the two benchmarks briefly widened to more than $8 a barrel, the widest gap since April 2015, reflecting surging USA crude supplies and a greater geopolitical risk to Brent-based crudes.

The world is now watching the growing tensions in the Middle East, and oil market analysts are guesstimating just how much Iranian oil supply the renewed US sanctions could stifle.

Source U.S. Energy Information Administration Short Term Energy Outlook May 2018
Source U.S. Energy Information Administration Short Term Energy Outlook May 2018

However, EIA expects West Texas Intermediate (WTI) crude oil price to average $5/barrel lower than the Brent price this year. "Brent is pricing in the idea that all the risk to supplies is overseas - there's a concern that all the supplies that are tight in Europe are only going to get tighter".

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

The tightening market has all but eliminated a global supply overhang that depressed crude prices between late 2014 and early 2017.


When sanctions were imposed in 2012, Iranian exports fell by about 1.2 million barrels per day, the organisation said.

Additionally, the market retreated as the U.S. Dollar strengthened against other currencies to the highest since December. As the dollar strengthens, investors can retreat from dollar-denominated commodities like oil.

The key oil demand growth center-China-has just beaten its own imports and refinery runs records, as refined oil product exports jump and domestic crude oil production hits seven-year-lows.


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 decision by US President Donald Trump to withdraw from the Iran deal "has switched the focus of oil market analysis from the fundamentals to geopolitics", the International Energy Agency wrote in its regular monthly report.

Much of the Iran's oil exports head to Asia now, with over than 1.5 million barrels per day sent to the likes of China, Japan, South Korea, and India.


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

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