Oil prices were up just under 2 per cent on Friday on tight global crude supplies and as the market waits for clarification on the Trump administration’s stance on the Iran nuclear deal. Statoil photo by KCA Deutag.
Oil prices capped by growing US crude supplies
Oil prices jumped just under 2 per cent on Friday and US WTI hit its highest mark in three years on tight global inventories that could only get more strained should the US follow through on its threat to abandon the 2015 Iran sanction relief agreement.
By 1 p.m., EDT, benchmark Brent crude was priced at $74.84/barrel, up $1.22 and US West Texas Intermediate rose 1.66 per cent or $1.31 to $69.74/barrel. The price briefly hit $69.97, the highest since November 2014. The Canadian Crude Index was up 2.08 per cent, or $1.04 to $51.12/barrel.
Bob Yawger, director at Mizuho, told Reuters that the May 12 deadline imposed by US President Trump for Congress and European allies to “fix” the Iran deal which could result in reduced Iranian crude exports, has boosted the oil market.
“You have the May 12 Iran and Trump headlines that support the market,” he said.
On Thursday, Iran’s foreign minister said the Trump administration’s demands to change the Iran deal with world powers were unacceptable.
In the past, Trump has called the agreement “one of the worst deals I have ever witnessed”. He says that unless European allies of the US fix the “terrible flaws” in the accord by May 12, he will not extend US sanctions relief for Iran.
According to Trump, some of the major flaws of the agreement are the “sunset” clauses and the Trump administration is hoping to extend more limits on Iran’s nuclear program beyond the expiration dates of the agreement.
Reuters reports that while European officials are hoping to find a way to save the deal, they have also begun work on protecting EU-Iranian business ties should Trump decide to abandon the pact.
Rising US oil production, now higher than Saudi Arabia, is undermining gains in oil prices. On Wednesday, the US Energy Information Administration reported that US crude stocks had risen by 6.2 million barrels.
Data from the EIA showed US production hit a record-high of 10.62 million b/d.
Baker Hughes released data on the US rig count showing the number of rigs in the United States was up by 9 to 834. This time last year, there were 703 oil rigs in the US. The Canadian oil rig count rose by one to 37, 10 more than at the same time last year.
Daniel Hynes and Soni Kumari, analysts at ANZ, told Reuters that they predict Brent prices could reach $80/barrel by the end of 2018, mostly due to geopolitical risks and tighter crude supply globally.
“We expect the market to tighten even further in second half 2018,” they wrote in a note to clients.