Crude Oil Rebounds Despite Iran Jitters

WTI Crude Oil

Daily June West Texas Intermediate Crude Oil

Geopolitical risks abound as well.

As the global oil markets show a deficit going forward, we believe it will translate into higher oil prices barring no geopolitical disruptions.

Understanding the global oil price is a lot simpler than it may appear. "In fact, lack of supply and demand balance harms OPEC". If they are, that may contribute to tighter global supplies and push oil prices higher.

An attack on an oil pipeline supplying Libya's biggest export terminal has reduced the North African country's production by at least 80,000 barrels a day and will take several days to fix, the National Oil Corp. said Sunday.

US Crude Oil output is expected to hit 10.7-M bbl this year, rivaling that of top producers Russian Federation and Saudi Arabia. Iran pumped about 4% of the world's oil production in March.

US supplies to Europe set for all-time high in April; on course to overtake Russia, Saudi. He was referring to action the US government has taken on Russian companies and individuals, as well as on potential new measures against struggling Venezuela and especially OPEC-member Iran.

“Russia is keeping all options open and Saudi Arabia is talking about a 2019 extension, ” UBS Group AG analyst Giovanni Staunovo said by email.

These two conflicts could also interconnect. Prices slipped 19 cent a barrel. Demonstrations, while not adequately covered by the media, continue to occur regularly in multiple locations in Iran, including in Khuzestan Province, the center of Iran's oil production.

Concerns over USA sanctions against Iran, Venezuelan production and the results of forthcoming elections there are combining with expected drawdowns in United States inventories, OPEC and Russian Federation cuts to output and apparently robust global demand, analysts said.

If Washington decides to reimpose these sanctions, Tehran also has threatened to withdraw from the deal, opening up additional uncertainty and potential instability.

Some investors are skeptical of the Trump administration's opposition to higher oil prices, as generally, they have produced several positive developments in the broader US economy - albeit at the cost of the consumer. Angolan oil production is also down.

The lower than expected draw came from a combination of higher than expected crude imports and higher than forecast U.S. oil production. Yet, The Wall Street Journal reported that "Permian producers are starting to encounter congested pipelines and shortages of materials and workers-bottlenecks that have caused some investors to sour on the region. It has increased now and currently all together we export 2.5 million barrels of oil and gas condensates", Zanganeh told state TV.

Portfolio managers now have record or near-record ratios of long to short positions in WTI (11:1), Brent (15:1), US gasoline (24:1) and European gasoil (45:1).

Despite slipping on Monday, overall the oil market remains well supported, especially by strong demand in Asia. That neatly ignores the massive transfer of wealth from consumers to producers that occurs at higher prices, and if higher prices are only achieved by artificially constraining supply rather than market forces, there is little justification for allowing that transfer to take place.

Yet Saudi Arabia signals it is willing to continue to tighten the market this year, despite the inventory drawdown to the five-year average within sight or perhaps even achieved.

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