Oil struggles near $68 as inventory gain overshadows Iran fears

Hugh Fox
May 3, 2018

Brent crude for July settlement slipped 64 cents to $72.72/bbl on the London-based ICE Futures Europe exchange, after adding 0.3% on Wednesday.

On Wednesday, while the oil prices remained steady, they surrendered to their early gains after data revealed that further hikes in the U.S. shale supply could affect the stockpiles whereas the hikes were also offset by an increase in Iranian exports.

Futures in NY increased 0.6 percent after a 1.9 percent drop on Tuesday.

Oil struggles near $68 as inventory gain overshadows Iran fears

According to CNN, bringing back sanctions on Iran could knock out as much as 1 million barrels per day of crude supply, dealing a "blow to increasingly fragile energy markets". The report showed that United States crude inventories soared by 6.2 million barrels to 435.96 million barrels in the week to April 27, which is the highest level in 2018. While the USA continues pumping record amounts of crude, Goldman Sachs Group Inc. expects only a "moderate" response to higher prices from American shale producers.

For the record, US president Donald Trump will make his decision whether or not to scrap the Iranian nuclear deal on or before May 12.

Trump will decide by May 12 whether to restore US sanctions on Iran, which would likely reduce its oil exports. The global benchmark crude was at $5.85 premium to July WTI.

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But analysts said the lack of a smoking gun took some of the heat out of oil prices.

U.S. crude oil inventories increased in the week to April 27, and the refining sector fell 60,000 barrels per day less than the previous week's average, the U.S. Energy Information Administration said in a report on Wednesday. The contract dropped $1.32 to close at $67.25 on Tuesday.

Trade was quiet in Asia as many markets, including China, India and Singapore were closed for public holidays. Stockpiles in the nation's oil-storage hub of Cushing, Oklahoma, increased 416,000 bbl, and those on the logistically isolated West Coast led with a 4.88-MMbbl build, the most since 1999. Initial forecasts see a build of 1.267 million barrels for crude, a 1.333 million barrels drop for distillates and a 424,000 barrels decline in gasoline stocks.

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Trump has given Britain, France and Germany a May 12 deadline to fix what he views as the flaws of the 2015 nuclear deal, or he will reimpose sanctions.

Iranian Foreign Minister Javad Zarif on Twitter called Netanyahu's claims "a rehash of old allegations".

GEOPOLITICAL RISK PREMIUM Some analysts feel that unless Trump gets global support, particularly vocal support from Europe, his decision to withdraw from the deal may not have a substantial impact on Iran's oil exports. Contributions of 200 words or more will be considered for publication.

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