Oil steadies as drilling increases in tight market

Lloyd Doyle
July 9, 2018

According to the latest reports, inventories at Cushing, the futures delivery hub for US crude futures, fell to their lowest level in 3-1/2 years. Although there is some general nervousness over the U.S. In May, Indian refiners imported 4.7 million barrels or about nine times more than April and the most of any month based on US government data going back to 2015.

The futures on US WTI oil with delivery in August rose by 0.49% to 74.16 Dollars per barrel, while the Brent variety increased by 0.61% to 77.58 USD per barrel.

On Thursday, the U.S. Energy Administration (EIA) announced that U.S. crude inventories had risen 1.2 million barrels in the week to June 29, to 417.88 million barrels.

Oil slipped toward $77 a barrel on Friday, under pressure from higher Saudi production and trade tensions between the United States and China, although oil supply disruptions lent support.

As part of a wave of retaliation for Friday's US tariffs, China has threatened a 25 percent duty on imports of USA crude.

Tariffs would make US oil uncompetitive in China. This means China would begin buying more oil from the Middle East or West Africa.

Looming over the oil markets is the trade dispute between the United States and China, the world's two biggest economies.

Shares of top oil marketing companies led the gains on NSE index, as US-China trade war fears weighed on oil prices. He added that his refinery had cancelled USA crude imports and would switch to Middle East or West African supplies instead.

In other news, potential supply shortages continue to be the hot topic. Venezuela is expected to lose another 400,000 bpd by year-end with production going to below 1 million bpd.

But for a crude market focused mainly on short-term impacts, analysts see nothing but gloom around the corner: in discussing the possibility of China placing a tariff on USA oil, Commerzbank said in a note that "Chinese demand would then shift to other suppliers, [and] because the oil market is already in tight supply due to the numerous outages, this would drive worldwide prices (Brent) further up".

"Iran's exports are some 2.7 million bpd, including condensate", it noted.

As for the Saudis upping their output, Bob Yawger, director of energy futures at Mizuho, said, "The more that Saudi Arabia adds to the market, the less of a supply cushion we have - that's a bullish twist to a bearish development". At this time, there may not be enough spare capacity to cover the losses from Venezuela and Libya.

Other reports by Iphone Fresh

Discuss This Article