Business Extra Podcast: What's next for the oil price rally?

Apr 29, 2018, 00:51
Business Extra Podcast: What's next for the oil price rally?

Oil prices edged lower on Friday as the dollar rose, but Brent was still headed for a third week of gains amid supply concerns should the United States reimpose sanctions on Iran.

A rise in USA government borrowing costs to their highest since 2013 this week has tempered some investor appetite for risk, but analysts said Brent crude futures, the global benchmark, may yet rise towards new 2018 peaks above $75 a barrel.

But new reports of falling crude inventories in the U.S. and creeping concerns that President Donald Trump will slap sanctions on Iran propped prices back up. Under the agreement, Iran suspended its nuclear program in return for the lifting of sanctions.

U.S. crude oil inventories C-STK-T-EIA rose by 2.2 million barrels in the week to April 20, to 429.74 million barrels.

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Brent crude for June delivery rose 74 cents to end the session at $74.74 on the London-based ICE Futures Europe exchange.

Soaring U.S. output has made WTI crude around $6 per barrel cheaper than Brent and drawn exports to record highs over 2 million bpd. Total volume traded was less than 1% below the 100-day average. A slight suggestion that President Trump might accept a revised deal between the six Western powers who signed the original nuclear deal with Iran on Tuesday did halt the price rise, but it was temporary.

Such figures would usually weigh on prices, but the market appears to be much more focused on the possibility of new sanctions against Iran. That's an increase of more than a quarter since mid-2016.

"Geopolitical concerns in the Middle East, together with Venezuela's deteriorating macroeconomic situation, are supporting oil prices".

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Dutch bank ING said "the wide discount for WTI to Brent saw exports rising 582,000 bpd week-on-week to a record high of 2.33-million bpd".

"All we're seeing is very strong pricing and the slight softening is primarily due to a stronger dollar", said Bjarne Schieldrop, SEB chief commodity analyst.

Additionally, traders expect a report on Friday by energy services firm Baker Hughes to show that USA producers increased the rig count.

Crude imports climbed 539,000 b/d last week to 8.469 million b/d, while refinery utilization rates averaged 90.8% for the week ending April 20, down 1.6%.

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