"There are still concerns as to how increasing oil prices will affect the US and global economy, and with tensions in the Middle East also growing, the next few months is likely to see the market become highly volatile".
The IEA is anxious that we will see demand destruction because of higher oil prices. The glut that had weighed on prices for the past three years has finally been eliminated, thanks to strong demand and output cuts by other producers in OPEC, the International Energy Agency said Wednesday.
A report by the International Energy Agency on Wednesday warned that the rising price could hit demand. Oil markets reacted bullishly, with global benchmark Brent crude rising about 8 percent to $71 a barrel.
If the United States were to force that amount of oil off the market again, it could turn a fast-shrinking surplus into a shortage and send prices higher and destabilise the careful balance of supply and demand that both Saudi Arabia and Russian Federation are trying to achieve. The inventory surplus has vanished, and more outages could push oil prices up even higher.
During the most restrictive phase of USA and worldwide sanctions, from 2012 to 2015, buyers in Asia limited their purchases of Iranian oil, and the European Union imposed its own embargo on crude from Iran.
From 1999-2007 we saw oil prices rise driven by global demand growth in China and rising prices on average did not slow demand.
Total says that it has spent about 40 million euros developing the project to this point. Markets face other disruptions besides Iran, with Venezuela's output plunging to the lowest since the 1950s as its economy unravels.
Trade group the American Petroleum Institute said crude stockpiles rose almost 5 million barrels, compared with analysts' expectations for a 763,000-barrel draw. As the dollar strengthens, investors can retreat from dollar-denominated commodities like oil.
Still, "we don't expect China to reduce its imports of crude from Iran given their long-term signed contracts and the ability to pay in yuan", said Abhishek Deshpande, the head of oil market research & strategy at J. P. Morgan. World supply, meanwhile, rose 1.78 million bpd in April from a year earlier, driven predominantly by non-Opec production.
Will OPEC and its non-OPEC partners continue to cut production with lower Iranian and Venezuelan volumes?
Distillate fuel product supplied averaged about 4.2 million barrels per day over the last four weeks, up by 3.0 percent from the same period past year. The demand for OPEC's crude for 2018 is 32.7 Mbd, based on the cartel's estimates, but current production is lower at 31.9 Mbd-bringing the deficit to about 800,000 b/d. Yet a big drop in Gasoline supply of 3.369 million barrels and a 768,000-barrel drop in distillate should give the market some support.
Is $100-$3.60 per gallon gasoline in the USA -or higher possible?