• Oil continues to jump amidst market readiness


    *Osama Suleiman from Vienna


    Oil prices rose to a one-year high yesterday as traders prepared for possible renewed of the US sanctions on Iran, as the supply-demand gap in the market is already narrow.

    The United States plans to impose new sanctions on Iran, which produces about 4 percent of world oil supplies, after it pulled out of a deal reached in late 2015 and limits Tehran's nuclear ambitions in return for lifting the US and European sanctions.

    The Iranian economy has suffered a painful blow to the return of economic sanctions that will remove Iran from its oil position in the market and threaten its market share.

    Oil is still heading for further deflation due to efforts by OPEC and its independent allies to cut production in return for continued demand growth and the US supplies, which are unable to compensate for the vast shortage of oil supplies from traditional producers.


    According to "Reuters", oil prices rose strongly after the announcement of these measures. Brent crude futures were the highest since November 2014 at $ 77.89 a barrel, up 0.9 percent from the previous settlement.

    US WTI crude futures hit their highest level since November 2014 at $ 71.84 a barrel, before falling to $ 71.78 a barrel. But this is still 0.9 per cent higher than the previous adjustment.

    The US Energy Information Administration reported that crude oil inventories in the United States fell more than expected, and stocks of gasoline and distillates also fell.

    Crude oil inventories fell 2.2 million barrels in the week ending May 4, versus analysts' forecasts for a 719,000 bpd drop.


    The Administration noted that crude stocks at the delivery center in Cashing, Oklahoma increased 1.4 million barrels.

    While, the decline in the consumption of refineries of crude oil was at 75 thousand barrels per day.

    Refinery operating rates fell 0.7 percentage points.

    Gasoline stocks fell 2.2 million barrels, against expectations of a drop of 450 thousand barrels.

     Distillate stocks, including diesel and heating oil, fell 3.8 million barrels, while 1.4 million barrels were expected to fall.

    US crude oil imports fell 955,000 barrels per day to reach 5.45 million barrels last week.

    The US Forbes report confirmed that President Donald Trump is firmly convinced that the United States would not yet be party to the so-called Iranian nuclear deal.

    It pointed out that the resolution means that Washington will soon impose tougher sanctions on Iran.

    As a result, it is almost certain that Iran would find it difficult to sell its crude oil to world markets.

    It pointed out that crude oil is the main source of vital foreign currency to Iran, which means that the American position will be a severe economic deprivation to Tehran.


    On the other hand, the report said that Saudi Arabia is actively seeking to diversify its economy away from its long dependence on oil, and in this regard is preparing for the partial sale of Saudi Aramco.

    It pointed out that the completion of this would lead to the success of other economic reforms in the country.

    The report pointed out that the placement of "Aramco" is better to come under a strong oil market with stable financial markets.

    It stressed that the exposure of Iran to sanctions means that there will be less of the Iranian oil, which weighs supply on the world market, and therefore there will be higher prices for energy.


    According to the report, Saudi Arabia has long been the leading producer within OPEC, which can easily raise or reduce production to address problems and ensure the market in a state of stability and balance is connected.

    In the report, according to the current situation and after the US decision, Saudi Arabia will choose to produce more oil as the deficit resulting from the sanctions imposed on Tehran does not lead to high crude oil prices, but to a high degree where demand is reduced.

    It pointed out that producing more oil at a higher price would boost revenues and support the Saudi economy.


    Robert Stehrer, Director of the Vienna International Institute for Economic Studies, stressed the importance of communications currently that is led by the Minister of Energy, Industry and Mineral Resources, Khalid Al-Falih, which includes major producers and consumers to avoid any negative effects of the US decision to cancel the nuclear agreement with Iran and re-impose strict economic sanctions. He added, to "Aleqtisadiya", that industry leaders are focused on protecting the market from any violent shocks as a result of various political decisions and developments. He emphasized that the Saudi-Russian coordination, which is at the highest level, can compensate for any shortage of supplies and keep the market stable and balanced in the supply and demand relationship.


    "The Saudi commitment to limit the impact of any supply shortfalls in cooperation with the rest of OPEC producers and consumers is an important message to reassure the markets of many concerns that were spread after the United States to take the decision to withdraw from the nuclear agreement with Iran," Goran Geran, assistant director of ZDF Bank in Croatia, said.


    He said that "OPEC" so far adhering to its agreement to reduce production in cooperation with producers from outside and believed that the task of restoring the full balance in the market has not yet been achieved.

    He pointed out that some go in his expectations that the US decision in making the commitment to reduce production is not justified in the light of the expected reduction of Iranian exports by more than one million barrels per day.

     Producers may surprise the market during their meeting in Vienna in June with new positions and decisions on production.


    "The tension in the Middle East and the prospect of further escalation following the US decision will lead to continued price rises, especially with the expected collapse of Iran's oil exports," said Arturas Feiferas, investment manager at Victoria Bank in Moldova.

    Feiferas pointed out that high prices would be very positive for investment and economies of producing countries, especially Russia, which relies heavily on oil and gas exports.

    He stressed that the arrival of prices to sharply high level that may have negative consequences, including weakening demand. So producers at their next meeting would stimulate the market for greater balance and ensure that prices remain at the appropriate levels to the global economy.​

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