Oil prices race to $80 as US drilling rises

July WTI Crude Oil
Weekly July WTI Crude Oil

15 May, 2018

Oil prices hit a three-and-a-half-year high on Tuesday, supported by tight supply and planned USA sanctions against Iran that are likely to restrict crude oil exports from one of the biggest producers in the Middle East.

Brent crude futures, the worldwide benchmark for oil prices, were at $78.21 per barrel at 0639 GMT, virtually unchanged from their last close and not far off a three-and-a-half year high of $78.53 a barrel reached the previous session. By 8am GMT, Brent was up 20c at $78.43.

June contract US West Texas Intermediate (WTI) oil futures climbed 0.5 percent to $71.38 per barrel, also not far from its November 2014 high of $71.89 reached last week.

Oil price is now trending towards $80 per barrel following bullish trading that heightened yesterday in the global market which saw the price leap to $78 yesterday, up from $67 April average.

The possibility of a shortfall in crude supplies should be able to support prices, along with the tight market, which may be known from the American Petroleum's (API) oil stockpile report later in the day and on data from the Energy Information Administration (EIA) that is due to be released on Wednesday.

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But it is unclear how hard the sanctions will hit Iran's oil industry. In China, the world's biggest oil importer, refinery runs rose almost 12% in April compared with the same month a year ago, to about 12.06-million barrels per day (bpd), marking the second-highest level on record on a daily basis, data showed on Tuesday.

The West Texas Intermediate for June delivery rose 0.26 USA dollar to settle at 70.96 dollars a barrel on the New York Mercantile Exchange, while Brent crude for July delivery rose 1.11 dollars to close at 78.23 dollars a barrel on the London ICE Futures Exchange.

The tightening market has just about solved the global supply overhang that has weighed down oil prices between 2014 and 2017.

OPEC also said OECD commercial crude oil stockpiles had declined in March to 9 million barrels above the five-year average.

The Permian basin in Texas, the biggest USA oil patch, is expected to see output climb 78,000 bpd to a fresh record of 3.28 million bpd.

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