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Oil steady on OPEC cuts, strong demand and looming Iran sanctions

Reuters  |  SINGAPORE 

By Gloystein

(Reuters) - prices held firm on Friday on strong demand, ongoing supply cuts led by cartel OPEC and looming U.S. sanctions against major crude exporter

But markets remained below multi-year highs from the previous day as surging output from the is expected to offset at least some of the shortfalls.

Brent crude futures were at $79.57 per barrel at 0310 GMT, up 27 cents, or 0.3 percent from their last close. Brent broke through $80 for the first time since November 2014 on Thursday.

U.S. Intermediate (WTI) crude futures were at $71.62 a barrel, up 13 cents, or 0.2 percent, from their last settlement.

Crude prices have received broad support from voluntary supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) aimed at tightening the market.

"Global inventories are approaching long-run averages, suggesting that the coordinated OPEC/non-OPEC supply cuts have been successful," said Jack Allardyce, and gas research analyst at

Beyond OPEC's cuts, strong demand as well as falling output from and a U.S. announcement earlier this month to renew sanctions against OPEC-member helped push Brent up by 20 percent since the start of the year.

"The dual supply shortcomings from and continue to provide substantial support," said Stephen Innes, for Asia/Pacific at in

With crude prices at levels not seen since late 2014, Allardyce warned the high fuel costs could start crimping conmsumption.

At $80 per barrel, Asia's thirst for costs the region a whopping $1 trillion a year, more than twice what it was in 2015/2016, the two years prior to the OPEC-cuts which started in 2017.

LONGER-TERM

The forward curve is in firm backwardation, a structure that suggests a tight market as prices for immediate delivery are higher than those for later dispatch.

Front-month Brent prices are now almost $1.80 per barrel more expensive than those for delivery in December.

"Longer-dated (crude) futures ... remain in backwardation, driven by confidence in indefatigable U.S. shale producers," U.S. firm said in a note, although it warned that strong demand as well as looming disruptions due to renewed U.S. sanctions against Iran and falling output in could soon start lifting the crude forward curve too.

U.S. has soared by more than a quarter in the last two years, to a record 10.72 million barrels per day.

That puts the within reach of top Russia, which pumps around 11 million bpd.

As a result of its surging production, U.S. crude is increasingly appearing on global markets as exports.

(Reporting by Gloystein; Editing by and Richard Pullin)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, May 18 2018. 08:52 IST
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