Oil Jumps as Supplies Shrink, Trump Seeks Curbs on Iranian Crude
Crude surged past US$71 for the first time since 2014 as American stockpiles shrank and the US told crude buyers to curb purchases from Iran.
Futures in New York climbed three percent the day after President Donald Trump’s said he is withdrawing from the deal which allowed the OPEC producer to boost exports and pledged new sanctions. At the same time, a US. government report showed the biggest crude inventory drop since March.
Mr Trump “coming forward and not renewing the deal, and adding sanctions back, obviously is very constructive for crude oil prices,” said Nick Holmes, an analyst at Tortoise in Leawood, Kansas, which manages US$16 billion in energy-related assets. Today’s “pretty constructive inventory report out of the US is also supportive.”
Sanctions on Iran will be re-instated after wind-down periods of 90 or 180 days, according to the US Treasury. Goldman Sachs Group Inc sees an upside risk to its oil price forecast following Mr Trump’s actions on Iran. The bank cited geopolitical risks in Saudi Arabia and Venezuela at a time when inventories are falling.
Saudi Minister of Energy and Industry Khalid Al-Falih said he will connect with other producers and consumers over the next few days to ensure market stability.
The open question is “how sharp will the teeth of the sanctions be?” said Thomas Finlon, director of Energy Analytics Group LLC in Wellington, Florida. “That is emerging and still unknown.” Even if the effects of the sanctions are limited, “you have to consider this market to be rather bullish,” he said.
West Texas Intermediate crude for June delivery advanced US$2.08 to settle at US$71.14 a barrel on the New York Mercantile Exchange, the highest level since November 2014. Total volume traded on the 9th May was about 30 percent above the 100-day average.
Brent for July settlement climbed US$2.36 to end the session at US$77.21 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a US$6.16 premium to July WTI.
European oil refiners and trading houses began preparing to cut purchases of Iranian crude.
The Trump administration has given buyers 180 days to wind down imports after pulling out of a landmark nuclear deal with world powers. Many of the traders and refiners who spoke to Bloomberg anticipate they will have to curb purchases unless the European Union can secure waivers.
US Stockpiles
In the US, EIA data showed crude stockpiles slid by 2.2 million barrels last week, exceeding a Bloomberg forecast for a one million-barrel gain in stockpiles before the report was released. The crude draw was largely due to a decline in imports, which fell by the most since November 2016. At the same time, domestic gasoline and distillate supplies also shrunk.
Traders assessing the impact of the US withdrawing from the Iran deal, combined with issues in Venezuela and a strong US inventory report has led prices to rise, said Craig Bethune, a senior portfolio manager at Manulife Asset Management. “Pretty much everything that could go positive to drive up oil prices has happened over the past few days.”
Other oil-market news:
Gasoline futures added 2.7 percent to settle at US$2.1673 a gallon on the 9th May.
The International Energy Agency said restoring sanctions on Iran, the world’s fifth-largest oil exporter, “may have implications for the market balance.”
Iran is still sticking to its nuclear commitments, according to IAEA inspectors. IAEA says it is “closely following” developments after US withdrew from JCPOA nuclear deal and re-imposed sanctions.
With President Donald Trump’s decision to reimpose sanctions on Iran driving up oil prices, shale’s less-loved plays are starting to look a bit more promising.
Source: Rigzone