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Brent Crude Hits New High On Soaring Demand

Brent Crude Hits New High On Soaring Demand”

U.S. West Texas Intermediate crude oil was up 28 cents, at $70.98/Bbl, remaining below last week's 3½-year high of $71.89/Bbl, Kallanish Energy reports.

OPEC and its partners made a decision to extend its production cuts till the end of 2018 in Vienna on November 30, as the oil cartel and its allies step up their attempt to end a three-year supply glut that has savaged crude prices and the global energy industry.

The difference between the two grades briefly widened to more than $8 a barrel, the widest gap since April 2015, reflecting surging USA crude supplies and a greater geopolitical risk to Brent-based crudes.

Michael Wittner, an analyst at Societe Generale, forecasts USA sanctions will remove 400,000-500,000 BPD of Iranian crude from the global oil market, Reuters reported.

Moreover, in a monthly oil market report released Monday, the Organization of the Petroleum Exporting Countries (OPEC) raised its forecast for global oil demand in 2018, expecting the world to consume 98.85 million barrels a day, or 1.65 million barrels a day higher than a year ago.

Now the United States has announced it will impose sanctions on Iran over its nuclear program, raising fears that markets will face shortages later this year when trade restrictions come into effect.

Source U.S. Energy Information Administration Short Term Energy Outlook May 2018
Source U.S. Energy Information Administration Short Term Energy Outlook May 2018

Surging prices were capped after China reported weaker-than-expected investment and retail sales in April and a drop in home sales, clouding its economic outlook even as policymakers try to navigate debt risks and defuse a heated trade dispute with the United States.

Investors also drew attention to statements by Saudi Energy Minister Khalid Al-Falih about their readiness to ensure the stability of the oil market after the USA decision to withdraw from the nuclear deal with Iran. The cartel also said its output rose slightly last month, mainly via Saudi Arabia, but raised its demand forecast for next year by 25,000 barrels per day to average 98.85 million barrels per day. As the dollar strengthens, investors can retreat from dollar-denominated commodities like oil.

U.S. President Donald Trump's withdrawal from a 2015 nuclear accord with Iran has driven oil to the highest since November 2014.

OPEC figures published on Monday showed that 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.

Rosneft's total average daily hydrocarbon production was at 5.71 million barrels of oil equivalent in the first quarter, close to levels in the same period previous year.

"We expect the EIA report to display bearish results amidst higher rig counts and production levels in the USA", said Singapore-based brokerage Phillip Futures.



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