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Published: Tue, May 15, 2018
Global Media | By Abel Hampton

Oil Prices Rise on Tightening Global Market Signs

Oil Prices Rise on Tightening Global Market Signs

OPEC revised up on Monday its forecast for global oil demand growth this year, but noted that sanctions, tariffs, and the USA withdrawal from the Iran nuclear deal point to rising uncertainty over the global economic growth momentum.

The price of world benchmark Brent crude has risen over the past 28 months, from roughly $26 a barrel in early 2016, to approximately $77/Bbl Monday, as the balance between supply and demand continues to tighten, Kallanish Energy understands.

In its closely watched Monthly Oil Market Report out today, OPEC revised up its global oil demand growth estimate by 25,000 bpd from the April report, to 1.65 million bpd.

This decline is largely due to an Opec-led supply cut deal put in place since the beginning of previous year to help stabilize prices, coupled with growing demand in Asia.

This followed stepped up tension in the Middle East after the opening of the United States of America's Embassy in Jerusalem, Israel.

OPEC has also predicted that USA drillers outside its group will pump 59.62 million barrels per day this year, or 1.72 million barrels a day more than last year. The gap between global and US oil prices widened as new figures showed that producers in the USA are ramping up quickly.

The increase was mainly the result of higher crude production in Saudi Arabia - the world's largest crude exporter and the de facto head of OPEC - and Algeria, the report said.

Oil service giant Baker Hughes reported on Friday the number of rigs operating in American oil fields rose by 10 to a total of 844.

With the U.S. drillers producing a record 10.7 million barrels a day, according to preliminary weekly data from the Energy Information Administration, the United States is approaching world's top producer Russian Federation, which pumps about 11 million barrels daily.

While the rising production figures are bearish clouds, "we're continuing to see the general momentum being brought forth, which has continued to point higher", said Ton Headrick, an analyst at CHS Hedging.

Prices received a boost last week following President Donald Trump's announcement on May 8 that the USA would withdraw from the Iranian nuclear deal.

Analysts noted that uncertainties remain in the oil market due to strong global demand expectations, geopolitical tensions and stabilizing US production growth in the second quarter.

"The issue of sanctions on Iran is likely to preclude any more pronounced price slide", Commerzbank analysts said in a note.

"The question is now whether that strong rally can be sustained and maintained", said Ole Hansen, head of commodity strategy at Saxo Bank.

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