Brent crude rises as U.S. inventories drop, supply outlook uncertain

Ivan Schwartz
July 8, 2018

The Tradefair team brings you the latest from United States politics.

Another day, another economic threat from Donald Trump.

The Republican president has lashed out at OPEC in recent weeks.

He added that his refinery had canceled us crude imports and would switch to Middle East or West African supplies instead.

The president's call to "reduce pricing" was an apparent reference for oil producers to churn out more supply in order to contain spiking oil prices.

However, oil prices have shot up and Trump, anxious about the impact on USA voters ahead of November midterm elections, is appealing to the Saudis for help.

High oil prices make fracking more economically viable for the U.S., now the third largest producer of oil worldwide.

President Trump has tweeted three times that he wants low oil prices, prodding the Organization of the Petroleum Exporting Countries to simply open its spigots and ramp up exports.

West Texas Intermediate crude for August delivery rose 20 cents to settle at US$74.14 a barrel on the New York Mercantile Exchange, after earlier rising to as high as US$75.27. If so, such a boost would be significant for the country's oil production, which hit 10.03 million barrels per day (bpd) in May.

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OPEC and Russian Federation announced in June they were willing to raise output to address concerns of emerging supply shortages due to unplanned disruptions from Venezuela to Libya, and likely also to replace a potential fall in Iranian supplies due to USA sanctions.

Oil prices have been buoyed by tightening supplies this year but there are signs demand may now be easing. It is these countries alone that stand to benefit from bringing additional supplies online, and helps to explain vocal opposition by Iran, Venezuela, and Iraq-who are already pumping near their maximum.

OPEC-member Iran, however, has warned it would not accept other producers reaping the benefits by taking its market share.

Further, the American Petroleum Institute (API) crude oil inventories data showed that the United States crude inventories fell by 4.5 million barrels to 416.9 million barrels in the week to June 29. This is a more harsh response than many analysts expected and, if it was to happen, could leave the global market undersupplied.

Chinese stocks fell sharply on Tuesday, with equity markets in Asia near nine-month lows as investors fear the Sino-U.S. trade row could derail a rare period of synchronized global growth.

"As we are all in agreement to depoliticise our efforts in the OPEC, we should not let others take politicized measures targeting OPEC's unity and independence".

That came after an outage at a major Canadian oil sands facility cut regional supply.

Speaking to the Wall Street Journal, Michael Cohen, Head of Energy Commodities Research at Barclays, said the market was now "caught between two forces".

Other reports by GizPress

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