The Most Underappreciated Story In The Oil Market

An oil drilling rig off the US Pacific Ocean coastline. Energy agency says US likely to increase output. Eugene Garcia  EPA

On Thursday, Brent topped $80 per barrel for the first time since November 2014, breaching a psychological threshold amid tightening inventories and widening geopolitical risk.

Oil could reach $100 a barrel in just a few months due to USA sanctions on Iran, the head of French energy giant Total said on Thursday.

Following the rally in crude oil prices, the National Assembly increased the oil benchmark price for the 2018 budget to $51 per barrel from $45 proposed by the Executive.

The rupee settlement mechanism is still in practice in the trade between the two countries, though the quantum has declined substantially since early 2016 when sanctions were lifted.

Oil prices have been on an upward trend since US President Donald Trump's decision on 8 May to pull out of a nuclear deal with Iran, casting a cloud of uncertainty over oil exports from Opec's third largest producer.

The prospects of a drop in Iranian oil exports due to sanctions imposed by the United States after pulling out from the Iran nuclear deal has moved the prices northwards. "We continued to receive support from concerns about supply from the Iranian nuclear accord, Venezuela.as well as the draw in crude", McGillian said.

Global inventories of crude and fuel have dropped sharply in recent months owing to robust demand and Opec-led production cuts.

The price of WTI crude, meanwhile, hit $72.10 per barrel.

The American Petroleum Institute was said to report US crude stockpiles climbed 4.85 million barrels last week, and that inventories at the key pipeline and storage hub Cushing, Oklahoma, rose 62,000 barrels.

US bank Morgan Stanley said it had raised its Brent price forecast to $90 per barrel by 2020 due to a steady increase in demand.

A stronger dollar makes oil more expensive for importing nations such as those in Asia, which are facing a trillion dollar bill for their imports this year as demand in the continent reaches a record high. If demand growth continues to be strong-as now expected-an already tight oil market could become even tighter amid geopolitical concerns, driving oil prices further up.

Leading production increases is the United States, where crude output has soared by 27% in the last two years, to a record 10.72-million barrels a day, putting the United States within reach of top producer Russia's 11-million barrels a day.

The U.S. has said it is possible there will be secondary sanctions imposed on European companies who continue to deal with Iran. US industry data was said to show crude inventories rose last week.

The IEA, which represents some of the world's largest consumer countries, also said it too would be "ready to act if necessary to ensure that markets remain well supplied".

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