IEA: Iran, Venezuela may cause oil market turmoil

IEA: Iran, Venezuela may cause oil market turmoil

Elsewhere, supply concerns have been mounting over the last week after President Donald Trump pulled the US out of the Iran nuclear deal - a move that reimposes sanctions on Iranian oil.

There are several ways to play higher oils prices. Domestic output will average 10.72 MMbpd this year, still above the 1970 record of 9.6 MMbpd and raised from a 10.69-MMbpd forecast in an April report.

Demand for oil drastically increased prices and has resulted in oil prices increasing by more than 70 per cent over the previous year.

The International Energy Agency (IEA) has cut its forecast for global oil demand growth this year on the back of higher crude prices approaching $80 a barrel after the United States made a decision to pull out of a nuclear pact with Iran.

Just a year ago, critics of OPEC were skeptical the cartel could "balance" the market and that its agreement would backfire by stimulating shale production, countering supply cuts.

Traders say the surge in United States exports to more than 2 million bpd has saturated some markets, leaving benchmark prices ripe for a correction.

Analysts project that oil exports from Iran could be reduced by about 0.5 million barrels a day as South Korea and Japan trim their imports, said analysts for J.P. Morgan in a recent report. "Plus we see a high likelihood of OPEC working with Russian Federation in 2019 to set a floor on oil prices".

First, the Iranian situation is a threat to future supplies, not current supplies; the potential collapse in Venezuela is also a threat to future supplies (although current supplies are dropping too).

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Critically, the US market is moving into its peak demand period, and this time of the year, inventories typically fall. The second half of 2017 saw more expansion as crude oil prices strengthened, MOMR noted.

OPEC production cuts helped stabilise the market, but they still remain way below the prices needed by some Gulf states to break even.

On a country-specific basis, about 86% of total non-OPEC supply growth past year came from the United States, followed by Canada, Kazakhstan and Brazil.

OPEC and its allies have finally succeeded in their 16-month campaign to clear a global oil glut, with inventories falling below their five-year average for the first time since 2014, the agency said. On May 8th Donald Trump announced that America would withdraw from its nuclear deal with Iran and impose new sanctions on the country.

The IEA, established in the 1970s to oversee the energy security of consuming nations, said it welcomed a statement by Saudi Arabia acknowledging the need to mitigate any shortage that might arise.

The Organisation of the Petroleum Exporting Countries (Opec), has not restricted the number of barrels available but has not made up for the loss of barrels from Iran. It will take up to 180 days to allow Iranian oil customers and other companies involved in doing business with Tehran to make plans.

At this point we don't have specific details on the sanctions that are coming for Iran.

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