Culture

Oil climbs on Middle East unrest, with Brent notching another multiyear high

Oil climbs on Middle East unrest, with Brent notching another multiyear high”

Despite Wednesday's dips and some indicators implying the financial oil has overshot physical oil, overall crude market conditions have tightened since 2017 when the Organization of the Petroleum Exporting Countries (OPEC) started to withhold supplies to push up oil prices.

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.

Oil prices rose to multiyear highs on Tuesday, bolstered by signs that major oil producers are still committed to reducing supply and the rising specter of US sanctions against Iran.

Oil prices rose as OPEC reported that the global oil glut has been virtually eliminated, while US crude´s discount to global benchmark Brent widened to more than $7, its deepest in five months.

US crude is trading at a hefty discount to Brent, the worldwide marker, thanks to sharp rises in USA production to 10.7 million bpd, which has left the American domestic oil market well supplied.

"It would be extraordinary if such a large jump did not affect demand growth, especially as end-user subsidies have been reduced or cut in several emerging economies in recent years", the IEA said.

"European and Asian buyers of Brent are pricing in the risks and realities of the fallout from sanctions on Iran to increased tensions in the Gaza strip, as well as the inability of traditional Brent oil producers to fill that void", said Phil Flynn, senior market analyst at Price Futures Group.

"For its part, the IEA will monitor developments closely and is ready to act if necessary to ensure that markets remain well supplied".

With renewed U.S. sanctions looming against OPEC-member Iran and oil demand strong, analysts said crude markets will likely remain relatively tight for much of the year. Crude oil production in March was around 3.76 million bpd, flat compared with the average levels in January and February.

And it estimated the "call" for OPEC crude would be 580,000 b/d above the cartel's actual output in April for the rest of this year.

Figures reported directly from OPEC members showed even deeper declines in production.

The IEA, which advises Western governments on energy policy, expects non-OPEC supply to rise by 1.87 million bpd in 2018, up from a previous forecast of 1.8 million bpd.



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