Oil markets tense on Middle East crisis, but rising United States supplies weigh

Mae Love
April 14, 2018

Concerns over falling supply from other countries such as Venezuela and Iran have helped support oil prices as well, with the potential for the U.S.to reinstate sanctions on Iran when it reviews its stance in May.

Brent crude futures were at $72.14 per barrel at 0536 GMT, up 8 cents, or 0.1 percent from their last close.

However, soaring USA crude production, which has increased by a quarter since mid-2016 to 10.46 million barrels per day (bpd), is undermining OPEC's efforts to tighten the oversupply and prop up prices.

In China, Shanghai crude futures were also up, rising by nine yuan to 427.20 yuan a barrel, with record volumes traded on the product that was only launched in late March.

Geopolitical risk has lifted prices to multiyear highs this week, as investors focused on news reports of potential action by western countries in Syria, along with reports that Saudi Arabia intercepted a missile over Riyadh on Wednesday, causing concern of instability in the region. Buhari also proposed an oil price benchmark of $45, exchange rate of N305/$1, oil production target of 2.3 million barrels/day, inflation rate of 12.4 per cent, and a gross domestic product (GDP) growth of 3.5 per cent.

In other news, US commercial crude inventories rose by 3.3 million barrels in the week through April 6.

On Monday, crude oil tracked global stock prices higher on signs over the weekend that President Donald Trump's administration may be softening its stance in the trade spat with China, though remarks from China's foreign ministry and a tweet from Trump suggest the dispute could easily heat up again.

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"All eyes are on geopolitical tension at the moment, not just because the market is that much more finely balanced, but because there are several pockets of geopolitical tensions", he said.

Not all oil market indicators pointed to ongoing price rises, however.

Looking at reactions in markets, crude oil prices continued to accelerate following the EIA report.

OPEC's main objective for the cuts is to eliminate a global surplus in oil stocks and rebalance the market.

Although markets are tense, supplies remain ample especially due to the United States.

The United States now produces more crude than top exporter Saudi Arabia. Analysts anticipate a small build in crude stocks and a reduction in products inventories.

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