Planned Iran sanctions, tight supply send oil to new multi-year high

Energy ETF Rally: About More Than Just Iran

OPEC also boosted its forecast for demand this year whiling trimming its outlook for global oil production.

Despite this, OPEC´s latest report said producers were cutting more than required under the deal, while producers not party to the agreement, such as United States shale companies, were starting to face constraints on future output. "Strong global oil consumption has come up against a 1½ -year-old deal led by OPEC and Russian Federation to manage crude supply among producers".

The report showed that OPEC's own production was up slightly in April by about 12,000 barrels a day to 31.93 million bpd, while an increase in output from Saudi Arabia was offset by a decline from Venezuela, where production fell by almost 42,000 bpd as the country's economic crisis lingers on.

The company's revenues increased "on the back of higher crude oil prices and optimization in sales channels despite the remaining constraints in production within the OPEC+ Agreement", it said on a statement issued on Monday.

This decline is largely due to an Opec-led supply cut deal put in place since the beginning of previous year to help stabilize prices, coupled with growing demand in Asia.

"That said, there are problems with transporting the oil at present, as the high $12 per barrel discount on WTI Midland as compared with WTI Cushing illustrates".

But oil ministers have since said other metrics should be considered such as oil industry investment, suggesting they are in no hurry to end supply cuts.

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OPEC pointed strong growth in developed and emerging markets and forecasted increased demand in 2018 to 98.85 million barrels per day.

Top exporter Saudi Arabia told OPEC it cut output by 39,000 bpd to 9.868 million bpd, which is the lowest since the supply cut deal began, based on figures Riyadh reports to the group. After the deal the production grew again and Iran had hoped to grow their output to around 4.7m barrels per day over the next four years.

The number of rigs drilling for oil in the US rose by 10 last week to 844 rigs, the highest in more than three years.

OPEC expects non-OPEC supply to expand by 1.72 million bpd this year, which is higher than the growth in global demand.

Oil prices were stable on Tuesday as ongoing production cuts by OPEC and looming US sanctions against Iran threatened to tighten the market amid signs of ongoing strong demand.

"President Donald Trump's decision this week to restore punitive sanctions on Iran, OPEC's third biggest producer, has dominated discussion of oil markets and energy stocks", reports CNBC.

And U.S. economic sanctions against Iran are likely to crimp that country's oil output, keeping oil prices elevated, even as analysts debate what the immediate impact of the sanctions will be.

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