Oil rallies to fresh 3-year high

Oil rallies to fresh 3-year high

A lower USA benchmark price could make American crudes attractive in Asia.

The production growth may be far from over, contributing to U.S. crude's discount to Brent, analysts said.

OPEC said that geopolitical developments "will also continue to impact global oil supply developments in the months ahead".

Washington's intention to re-impose the "toughest" sanctions on Iran appears to be playing into the hands of Chinese investors and oil futures traders, analysts have come to believe.

So far this year, China has lived up to these expectations.

Russia's largest oil producer, in which British oil major BP owns a 19.75 stake, said production of liquid hydrocarbons, or oil and gas condensate, stood at 4.57 million barrels per day (bpd) in the first three months of 2018. China's refinery runs rose almost 12 percent in April from a year earlier, to around 12.1 million barrels per day, marking the second-highest level on record on a daily basis, data showed.

The data poses worries that near-record high refinery runs may be short-lived. USA drillers added 10 oil rigs in the week to May 11, bringing the total count to 844, the highest level since March 2015, energy services firm Baker Hughes said on Friday. Crude oil production in March was around 3.76 million bpd, flat compared with the average levels in January and February.

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The IEA said Iran's exports fell by around 1.2 million bpd the last time sanctions were imposed over the country's nuclear activities in 2012 before being lifted four years later.

With the current price at $78.38 per barrel, Nigeria would be making an excess of $31.38 per barrel sold.

Stronger oil prices are also spilling into other markets.

Oil prices were mixed Tuesday, with the US benchmark pulling back after hitting multiyear highs, even as turmoil in the Middle East continued to boost the global benchmark.

"Germany has said it will protect its companies from United States sanctions, Iran has said French oil giant Total has yet to pull out of its fields and all the while it seems the Chinese are ready to fill the void created by the US".

However, the tailwinds for crude oil now vastly outnumber the headwinds, so prices will likely continue upwards in the coming days, especially in light of the escalation in Israel following the move of the US embassy from Tel Aviv to Jerusalem that ignited protests in Gaza, prompting an immediate military response from the IDF.

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