Oil prices hit a three-and-a-half-year high yesterday supported by tight supply as well as renewed U.S. sanctions against Iran that are likely to disrupt crude oil exports from one of the Middle East's major producers. The commercial crude inventory remains in the lower half of the average range for this time of year.
Crude inventories fell by 1.4 million barrels in the week to May 11, compared with analysts' expectations for a decrease of 763,000 barrels. According to the experts' projections, daily oil consumption across the globe will increase by 1.5 million barrels in 2018 and 1.4 million barrels next year. The cargoes are holding 500,000 barrels of oil and 300,000 bpd of jet fuel, gasoline and diesel.
"A couple of years ago there was a view that USA shale was Superman and that, basically, we wouldn't have to go back to the traditional producers and say, 'Put more barrels on in the event of a shortage.' But, again, now we have these infrastructure constraints and pipelines that are reaching capacity, the Trump administration has to appeal to traditional allies in terms of managing the market". Since US and global sanctions were eased in January 2016, Iran has regained its position as one of the world's biggest oil exporters, shipping more than 2 million barrels a day to customers in Asia, Europe and Turkey.
However, the tailwinds for crude oil now vastly outnumber the headwinds, so prices will likely continue upwards in the coming days, especially in light of the escalation in Israel following the move of the USA embassy from Tel Aviv to Jerusalem that ignited protests in Gaza, prompting an immediate military response from the IDF. The global benchmark crude traded at a $7.72 premium to WTI for July, the largest for the front-month spread since 2015. The 52-week range on June futures is $44.54 to $71.89. Jet fuel product supplied is down 5.6 percent compared to the same four-week period previous year. The non-petroleum portion of the deficit rose by $26 billion and the petroleum-based portion improved by almost $4 billion.
USA crude exports jumped by 689,000 b/d last week to 2.566 million b/d, a record high, leading to a draw in crude stocks, Energy Information Administration data showed Wednesday.
"Crude oil prices have risen by almost 75 [percent] since June 2017".
Refinery crude runs rose by 149,000 barrels per day, EIA data showed.
On the other hand, USA production is growing at a pace that made traders hesitate last week after Baker Hughes reported yet another increase in drilling rigs. Over the last month, gasoline demand averaged about 9.4 million barrels per day, up by 0.7% year over year.
It did not, however, really reach a sustained 3 million barrels per day production despite being reluctantly exempted from the current OPEC plus agreement with non-OPEC producers. Refineries operated at 91.1% of their operable capacity last week.
The bank says Venezuela's production will drop by 500,000 barrels a day over the following 20 months, but a major drop in Iranian exports is excluded from the forecast. The International Energy Agency on Wednesday warned that demand could be sapped by higher-than-expected prices.
Despite rising imports stocks moved lower.