Brent crude oil breaks above US$70/bbl

The Brent crude oil benchmark climbed more than US$1.50 to close above US$70/bbl on the 23rd March, marking the front-month’s highest level since late January while the US light, sweet crude oil benchmark for May also climbed more than US$1.50 to approach US$65.90/bbl.

 

“Geopolitics and growing concerns about the US leaving the Iran deal lifted oil prices,” Norbert Ruecker, Julius Baer’s head of macro and commodity research, told the Wall Street Journal.

 

Last week US President Trump’s administration reshuffled the national security team, naming John Bolton as national security adviser. Mr Bolton is expected to take a tougher stance against Iran.

 

Mr Trump has repeatedly criticised a 2015 international agreement to curb Iran’s nuclear programme. If the US pulls out of the deal and then issues US economic sanctions on Iran, analysts say that action could limit Iran’s oil exports and reduce world oil supply.

 

Meanwhile, declining US oil supplies helped boost prices. The US Energy Information Administration reported a drop in the nation’s crude inventories of 2.6 million bbl for the week ended the 16th March.

 

The US inventory decline comes as growing world oil demand has helped offset concerns over rising US oil production, especially from unconventional plays.

 

“All major economies remain in an expansion mode,” Bank of America Merrill Lynch analysts said. “For now, the global recovery in oil demand has been broad-based across regions and economic sectors.”

 

Many analysts suggest a possible trade war aimed at US tariffs towards its trading partners could hurt oil demand. Last week the Trump administration announced new tariffs on China. Consequently, oil prices fell on the 22nd March.

 

Energy prices

The May light, sweet crude contract on the NYMEX gained US$1.58 on the 23rd March to settle at US$65.88/bbl. The June contract closed up US$1.53 to US$65.71/bbl.

 

The NYMEX natural gas price for April dropped by nearly 3¢ to US$2.59/MMbtu. The Henry Hub cash gas price fell 6¢ to US$2.56/MMbtu on the 23rd March.

 

Ultralow-sulphur diesel for April increased 2.6¢ to a rounded US$2.02/gal. The NYMEX reformulated gasoline blendstock for April gained 2¢ to US$2.03/gal.

 

Brent crude oil for May was up US$1.54 to US$70.45/bbl on London’s International Commodity Exchange. The June contract was up US$1.43 to US$69.81/bbl. The gas oil contract for April was US$611/tonne, up US$4.50.

 

The Organisation of Petroleum Exporting Countries’ basket of crudes was US$66.39/bbl on the 23rd March, up 20¢.

 

Source: Oil & Gas Journal