According to the news report by Bloomberg, the price of oil shot up to $80 per barrel in London for the first time after 2014, as there are growing signs that global stockpiles are shrinking.
The Brent crude oil futures rose by as much as 1.5% last week as the output curbs placed on major oil producers shrunk surpluses around the globe, and the situation in Venezuela and Iran grew worse. In New York, however, the price rally died an early death after reports of record breaking production at the US shale oil fields as well as ramp ups on drilling there.
Thanks to the fact that the gap between the global benchmark prices and US prices is increasing, the US saw unequalled exports of oil from the country. According to data from the Energy Information Administration, US crude oil stockpiles have fallen for a second week, however, exports of the crude have gone up by 689,000 barrels per day.
According to the lead oil analyst at Stratas Advisors, Ashley Peterson, the global oil oversupply has now been taken care of, however, the OPEC still is not revealing anything about when their deal of controlling oil production will be closed. This is good for the global oil markets, with prices soaring. With regard to the US oil production, Peterson stated that all the extra oil is being exported, so there is no question of a glut in the country.
The price of oil shot up this month after the US took itself out of the Iran nuclear accord, the Middle East conflict further worsened and Venezuela’s exports of oil were frozen by ConocoPhillips. The Saudi Arabian Minister for Energy, Khalid Al-Falih, as well as the United Arab Emirates’ Minister for Energy, Suhail Al Mazrouei expressed concern about the volatility in the oil market, averring that this was being caused by geopolitics.
Goldman Sachs analysts however don’t agree with these statements. According to them, demand for oil will continue to remain strong and all these concerns about economic growth are probably just temporary. Therefore, those money managers who are reducing their bullish bets on the price of oil are actually making a mistake, as far as Goldman Sachs is concerned.
The Brent futures for July increased by $0.02 to close at $79.30 per barrel, after it touched $80.50 per barrel – the highest it has been since November of 2014. Brent futures traded at $7.73 higher than the US West Texas Intermediate for the same month delivery, which is the biggest spread since 2015. The US benchmark for delivery in June spiked but then settled unchanged at $71.49 per barrel. However, the total volume traded at the New York Mercantile Exchange was 22% higher than the 100-day moving average.
According to Michael Tran, RBC Capital Markets commodities strategist, the spread between the global benchmark and the US benchmark can be expected to remain wide the entire summer.
Total SA’s Chief Executive Officer Patrick Pouyanne stated that he wouldn’t be surprised to see the price of oil go up to $100 per barrel in the near future what with Iran’s announcement pushing up oil prices even further.
Despite the aggressive stance being taken by the US in its re-imposition of sanctions against Iran, French President Emmanuel Macron stated that neither France nor the European Union had any intention of imposing sanctions on American companies.
Thanks to all the movement in the oil market, the S&P 500 Energy Index rose by 1.4%. The gains were led by Marathon Petroleum Corp., as well as Andeavor and Valero Energy Corp.