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Published: Wed, May 16, 2018
Economy | By Melissa Porter

Oil inventories of developed nations decline: OPEC report

Oil inventories of developed nations decline: OPEC report

The OPEC report, published Monday, showed Venezuelan production at its lowest in decades and said the global oil glut had been virtually eliminated. Yesterday, the Energy Information Administration said it expected shale oil production to hit 7.178 million barrels daily next month thanks to a record-high monthly increase of 144,000 bpd.

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

Russian Federation has pledged to cut its output by 300,000 bpd from the 11.247 million bpd produced in October 2016, the baseline for the deal.

Brent crude oil reached $79.22 a barrel, up 99 cents and its highest since November 2014.

Mousavi, whose NIOTC is tasked with controlling Iran's oil export facilities, went on to say that Iran now had no oil stored in its tankers, which means that the Islamic republic goes on selling its oil reserves, with exports as of March 2017-2018 hitting roughly 800 million barrels, IRNA reported. Market observers and analysts argue that USA energy stocks are in a position to outperform broader equity markets this year, even if oil prices don't move higher.

The move will cause a major shift in global supply lines with many of Iran's customers looking elsewhere for petroleum products and boost the price of crude to levels not seen in recent years.

OPEC's success with the oil production cutting deal has been to a significant extent aided by Venezuela's catastrophically dropping production as the country grapples with foreign exchange shortage, USA sanctions, and a devastating economic crisis.

The U.S. decision to leave the Iran nuclear deal had largely been priced into the oil markets ahead o the announcement.

The oil group also lifted its 2018 forecast for production growth outside of OPEC and now sees it expanding by 1.72 million bpd, up from a prior view of 1.71 bpd, with the US accounting for 89% of the 1.72 million bpd increase.

They'll also be watching the results of Iraq's parliamentary elections, which are expected to be announced Monday and could, according to S&P Global Platts, "reshape its oil ministry and delay output expansion projects in OPEC's second-largest member".

"The initiation of further sanctions on Russian Federation and the withdrawal from the Iran nuclear deal are additional elements that may be a source of uncertainty in the future, impacting the USA economy and global trade", the report read.

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

Otunuga noted that increasing United States shale production could dampen any long-term anticipated price hikes. On the supply side are expectations that as prices continue to rise so will production, including US oil and shale production.

Analysts say with a renewed output cut agreement in place through the end of 2018 that brings Libya and Nigeria into the fold, OPEC enters the new year brimming with confidence that its market rebalancing efforts will remain on track.

Some market participants believe energy stocks will show more responsiveness to oil's rally.

Speaking to analysts, Scaffardi said the lack of Iranian crude supplies would be a problem in terms of prices but not volumes.

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