Archive for : May, 2018

Middle East tensions

According to Offshore Technology, Oil prices have crossed $70 a barrel for the third day due to tensions in the Middle East over concerns of supply disruptions. Brent crude futures rose by 28 cents to reach $70.40 a barrel, while West Texas Intermediate (WTI) crude futures grew 19 cents at $65.74 a barrel, reported Reuters.

Oil prices grew by more than 7 percent this month and by 5.3 percent in the first three months of the year. Brent prices have risen due to geopolitics and expectations of OPEC and its allies controlling output. For the second time this year, prices crossed $70 a year since late 2014. Analysts, however, are cautious.

PVM Oil Associates analyst Tamas Varga was quoted by Reuters as saying: “The recent rally in oil prices might have taken some by surprise as the underlying fundamental picture does not justify Brent being close to $70/bbl. This view is based on the simple fact that non-OPEC oil supply growth will trump the increase in global oil demand this year.”

“The recent rally in oil prices might have taken some by surprise as the underlying fundamental picture does not justify Brent being close to $70/bbl.”

“The price strength of the last couple of weeks is down to two factors. The first one is a stable OPEC output level which leads to impressive compliance (with an oil supply-cutting deal). The second one is supply-side geopolitical developments in Venezuela, Libya, and Iran, the cutest of which is Iran.”

With the US threatening to withdraw from the nuclear agreement that Iran signed with six world powers in 2015, there are chances of sanctions imposed, which could obstruct oil exports. Since the start of 2017, OPEC and its allies have curtailed production to push prices. This agreement will end in 2018 but OPEC member Saudi Arabia has supported the deal to be extended into 2019, where to buy liquor.