Oil price surge to constrain demand growth, says IEA

Despite concerns that USA sanctions are likely to restrict crude exports from major oil producer Iran, oil prices fell on May 16 ahead of an expected rise in the US' crude inventory that could provide more evidence that demand may be slowing.

US light crude was 26 cents lower at $70.69 a barrel, also not far off its highest since November 2014. It stood at $79.39 as of 8:20 pm Nigerian time.

Recall that crude oil prices have in the past months maintained a steady rise, thanks in parts to Trump's infamous Twitter comments on Syria and Russian Federation.

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. Saudi Arabia has indicated it could be ready to step in to meet any shortfalls arising from the United States sanctions against Iran.

U.S. West Texas Intermediate (WTI) crude futures were up 41 cents at $71.90 after also hitting their highest since November 2014, at $72.30 a barrel.

PREMIUM Global oil prices rose to their highest levels in three-and-a-half years in the aftermath of United States President Donald Trump's announcement that the U.S. will pull out of the Iran nuclear deal.

"Though Iran is unlikely to give back all the production gains charted since the [Joint Comprehensive Plan of Action] nuclear deal removed sanctions in 2016, they are likely to see steady declines ahead, joining Venezuela in the ranks of OPEC members suffering from involuntary production losses", said Fraser.

Oil hits high
Geopolitics Trumps Oil Market Fundamentals: IEA

"Demand at the start of the year was supported by cold weather in Europe and the U.S., the start-up of new petrochemical capacity in the United States and a solid economic background", the IEA said. "Oil fundamentals are now more bullish as robust demand faces supply disappointments", Goldman wrote in a note to clients.

"While the economic environment will continue to support oil demand. support from harsh weather conditions will vanish and the recent jump in oil prices will take its toll", it said.

Prices of aromatics such as benzene and toluene, as well as those of petrochemical feedstock, naphtha, tend to follow crude movement closely.

The US Energy Information Administration said crude inventories fell by 1.4 million barrels in the week to 11 May, compared with analysts' expectations for a fall of 760,000 barrels.

On the flip side, high oil prices would hurt consumption, the International Energy Agency warned on Wednesday as it lowered its global oil demand growth forecast for 2018 to 1.4 million bpd from 1.5 million bpd.

"For now, the rapidly changing geopolitical landscape will move the attention away from stocks as producers and consumers consider how to limit volatility in the oil market", the IEA said.

U.S. preparing to impose new sanctions on Iran: White House
Last fall, the Media Research Center released a study citing that figure after evaluating the nightly newscasts on ABC, CBS and NBC during the summer.

  • Sonia Alvarado