Published: Tue, May 15, 2018
Markets | By Noel Gibbs

Oil markets firm amid OPEC cuts, Iran sanctions

Oil markets firm amid OPEC cuts, Iran sanctions

Global oil demand is rising sharply.

The Organization of the Petroleum Countries said in its monthly report Monday that petroleum stockpiles in the developed world stand just 9 million barrels above the five year average - a sign that the glut that weighed on the market for years is almost gone.

The group also raised its forecast for oil supplies from non-members as U.S. production continues to surge, warning that the global economic growth outlook has become uncertain, in part due to United States trade policy and sanctions on Russian Federation and Iran.

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

Referring to President Donald Trump's decision to withdraw from the Iran nuclear deal, OPEC said: "So far, the impact on the global economy has been minor and negligible, but the build-up of potentially disruptive concerns has increased".

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The OPEC report said oil inventories in OECD industrialised nations in March fell to 9 million barrels above the five-year average, down from 340 million barrels above the average in January 2017.

Oil and gas analyst for Hydrocarbon Capital Malcolm Graham-Wood predicts that about 1m barrels of oil will go off the market following the decision, reducing the supply of oil which was tight from before.

OPEC slightly raised its estimate of growth in world demand this year to 1.65 million bpd.

"The Iran sanctions are likely to fuel speculation of tighter global supply, while heightened geopolitical tensions in the Middle East may fan fears of potential supply disruptions", he said. This might mean that by the end of the year, the U.S. will be the world's largest producer of oil. "We still expect the impact on Iran's oil output to be fairly small, given that Tehran and the European Union have chose to stay in the deal", analysts said.

"Although oil could venture higher in the near term, robust production from USA shale remains a threat to higher oil prices", he said.

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Both oil futures contracts hit their highest since November 2014 last week at 78 dollars and 71.89 dollars a barrel, respectively as markets anticipated a sharp fall in Iranian crude supply once USA sanctions bite later this year.

"It should have risen considerably further, driven primarily by the Permian Basin shale play", said a note compiled by Commerzbank analysts.

Oil reached $78.28 a barrel on Monday, the highest since November 2014, after the OPEC report was published.

The post Oil prices race to $80 appeared first on The Nation Nigeria.

The company's revenues increased "on the back of higher crude oil prices and optimization in sales channels despite the remaining constraints in production within the OPEC+ Agreement", it said on a statement issued on Monday.

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