Monday, 10 December, 2018

Oil Market May Get Blindsided by Iran Deal

Jodi Jackson | 08 May, 2018, 02:26

The oil price has rallied in part because traders expect sanctions to return. Looking at reactions in markets, crude oil prices weakened immediately following the EIA report.

United States oil production continues to surge and with that we are seeing bottlenecks starting to emerge.

Brent crude, the global benchmark, has benefited greatly from ongoing geopolitical risks, with the US-versus-Iran standoff as well as an ongoing collapse in Venezuelan production attracting most of the attention.

As for Venezuela, a former head of state oil producer PDVSA told Bloomberg that the company "may fall into an accelerated spiral downward".

The worldwide exhibition which holds the first rank in the Middle East and fifth in the world in terms of the number of participants is organized by the Iranian Oil Ministry. Output dropped to 1.50 million bpd in April, the survey found, a new long-term low. The petrol price chains 10 weeks of rises and is paid in supplier to 2.9 dollar gallon, highest level also in three and a half years. Prices rose 2.4% last week. In 1998, the year prior to Hugo Chavez becoming president, Venezuela was producing 3.5 million bpd and had plans to increase that production go 6 to 8 million bpd by 2008.

Angolan crude oil is facing a hard time in Asia.

It is a level that has not been seen since November 2014. Other crude that is linked to Dubai or WTI is becoming less expensive. Oil is the main export of Venezuela and provides most of the country's foreign currency.

A supply deficit is looming and the source of this is OPEC countries. The figures are the highest since March 2015. The risk of supply disruption has lifted aluminium, and to a lesser extent nickel, after the USA sanctioned several Russian oligarchs, one of them holding a major stake in the biggest aluminium producer outside China.

Crude prices have proven particularly hard to pin down lately because of factors such as geopolitical risk and the rise of the US shale industry, as well as efforts by the Organization of Petroleum Exporting Countries and external producers to eliminate global supply.

Though Citi has projected that the USA could bypass Saudi Arabia in the export of crude and petroleum products, US crude oil exports have been relatively low compared to other major oil producers since the Obama Administration lifted the ban of American crude oil exports in 2015.

Crude oil is produced by a small group of countries, which include the United States, Saudi Arabia, and Russian Federation.

But many ministers are still debating that $70 oil isn't enough for investments so seeing oil at $80 maybe plausible to them. This, in turn, translates into higher prices for consumer. Striking a balance between these two price ranges is not going to be an easy task.

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