Geopolitics Trumps Oil Market Fundamentals: IEA

How will the Iran deal collapse impact crude prices

How will the Iran deal collapse impact crude prices

The implications for oil prices are massive... More and more market watchers see further upside for prices. The strength of Brent crude, now trading at almost $7 above USA futures, and $4 above Dubai, has made it hard to find buyers for grades priced off Brent. "I won't be surprised if prices correct by $20 a barrel". Tightening supplies and strong demand is providing the support. The continued withdrawals "reflect a fairly tight market".

Venezuela and Nigeria are among the cartel members beset by political turmoil, while Iran may be hit with harsh U.S. sactions that could effect the oil industry. 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.

We're looking at a developing battle between long-term bulls, who are betting on support from supply disruptions, and short-term bears, who expect prices to be capped or even weaken due to increasing USA production. After the May 2017 meeting in Vienna, when OPEC+ extended its pact by nine months, the markets sold off sharply.

Crude futures pared declines Wednesday after the release of the EIA data, but stayed in negative territory as the size of the draw fell short of market expectations.

Going forward, however, Iran's oil exports are expected to fall. "Coupled with no signs of new supply coming on, demand remaining strong as well as the geopolitical turmoil in Iran and you have the conditions for this push up towards $80" a barrel.

Do Saudi Arabia and its Gulf allies have enough spare capacity to stabilize the market?




Demand for oil drastically increased prices and has resulted in oil prices increasing by more than 70 per cent over the a year ago. According to the analysts' estimates, global crude oil output would need to grow by 5.7 million barrels a day by 2020 to meet the surge in demand for distillates.

Brent crude futures were down 31 cents at United States dollars 77.43 a barrel by 11:17 a.m. EDT (1517 GMT), while USA crude futures fell 30 cents to USD 71.01 a barrel.

US crude fell 15 cents to $71.16 a barrel as of 10:45 a.m. EDT, while Brent lost 20 cents to $78.22 a barrel.

Although the IEA conceded that the global economy is robust, it pointed out that oil prices have risen about 75 percent since last June, and "it would be extraordinary if such a large jump did not affect demand growth". That's despite consistent increases in USA production. "The price is pretty good and we're not seeing any growth outside the USA", said the investor.

Speculation has been swirling over how a US decision to renew sanctions on Iran may curb exports from OPEC's third-largest producer, and whether output from America or other nations such as Saudi Arabia will be able to fill any loss of supply. The call on OPEC crude and stockpiles will average around 32.25 million barrels a day for the remainder of 2018, about 600,000 higher than April output.

Is $100-$3.60 per gallon gasoline in the US -or higher possible?

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