..As IEA Says Market Well Supplied
Yemisi Izuora
Oil prices fell on Thursday as record U.S. output and rising crude stockpiles dampened the impact on markets of tighter U.S. sanctions on Iran and producer club OPEC’s continued curbs on supply.
Brent crude futures were at $74.35 per barrel down 22 cents, or 0.3 per cent from their last close, while the U.S. West Texas Intermediate (WTI) crude futures were at $65.60 per barrel, down 29 cents, or 0.4 per cent, from their previous settlement.
Crude futures rose to 2019 highs earlier in the week after the United States said on Monday it would end all exemptions for sanctions against Iran, demanding countries halt oil imports from Tehran from May or face punitive action from Washington.
“Following the U.S. decision to toughen its sanctions on Iran we have revised up our end-year forecast for Brent crude from $50 to $60 per barrel,” analysts at Capital Economics said in a note.
The U.S. decision try and bring down Iran oil exports to zero comes amid supply cuts led by producer Organisation of the Petroleum Exporting Countries (OPEC) since the start of the year aimed at propping up prices.
As a result, Brent crude oil prices have risen by almost 40 per cent since January.
Despite this, Capital Economics said “we still expect oil prices to fall this year as sluggish global growth weighs on oil demand, U.S. shale output grows strongly and investor aversion to risk assets like commodities increases.”
U.S. crude oil production has risen by more than 2 million barrels per day (bpd) since early 2018 to a record of 12.2 million bpd currently, making the United States the world’s biggest oil producer ahead of Russia and Saudi Arabia.
In part because of soaring domestic production, U.S. commercial crude oil inventories last week hit a October 2017 high of 460.63 million barrels, the Energy Information Administration said on Wednesday. That was a rise of 1.3 million barrels.
Meanwhile, the International Energy Agency, IEA, has said that the global oil markets
are adequately supplied and spare production capacity remained at comfortable levels, while highlighting the need to avoid higher oil prices amid fragile global economic growth.
The agency’s comments come against the backdrop of the United States tightening its sanctions on leading oil producer Iran.
“Further tightening of sanctions on Iran will have an impact on its export capacity,” the Paris-based IEA said, adding Iranian shipments of crude and condensates are running around 1.1 million barrels per day (bpd), 300,000 bpd lower than March, and 1.7 million bpd lower than May 2018.
The agency, which coordinates the energy policies of industrialised nations, said global spare production capacity has risen to 3.3 million bpd due to high compliance rate with the agreed supply cuts among the Organization of the Petroleum Exporting Countries and its allies.
The Organisation for Economic Co-operation and Development, OECD oil inventories at the end-February were at 2.871 billion barrels, above the five-year average, IEA said, adding total oil supplies from the United States are expected to increase by 1.6 million bpd this year.