Published: Mon, June 04, 2018
Markets | By Josh Butler

Iran's weekly light crude price surpasses $77

Iran's weekly light crude price surpasses $77

OPEC and non-OPEC countries agreed in November 2016 in Vienna to cut oil production by 1.8 million barrels per day, roughly 2 percent of global oil production, to ease a global supply glut and push up oil prices that dropped below $30 in early 2016 as the situation wa further exacerbated by China's economic slowdown and the USA increasing oil output as a shale oil producer. The Bloomberg Dollar Spot Index rose 0.2 per cent.

Global benchmark Brent LCOc1 fell 91 cents to $76.65 per barrel.

The spread between the two benchmarks, which climbed above $11 a barrel, had narrowed slightly by 12:20 GMT to about $10.95 as Brent erased some of its earlier gains. Now OPEC is facing the problem, if we really want to choke off American production, how low does the price have to go?'

According to the International Energy Agency, global oil demand increased 1.6 percent in 2017, significantly higher than the average increase of 1 percent over a decade. The Conference Board's U.S. Leading Index, one widely watched measure of turns in the business cycle, is at some of its highest levels on record.

A meeting of three major OPEC energy ministers ahead of the Organisation of the Petroleum Exporting Countries' summit on June 22 sparked speculation about possible action on the current 1.8 million barrels a day production cap deal with Russian Federation. Before that bigger gathering, energy ministers from Saudi Arabia, the United Arab Emirates and Kuwait plan to meet on Saturday.

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Concerns about US bottlenecks are contributing to the decline in USA futures as well.

The price increase was mainly due to the production cut by the Organisation of the Petroleum Exporting Countries, OPEC, and its partners. The Permian basin, which stretches across West Texas and eastern New Mexico, is the largest US oilfield.

According to the Energy Information Administration (EIA) of the U.S. Energy Department, the average daily oil production in the country returned to record values in March and for the first time in the U.S. history reached 10.474 million barrels per day, an increase of 2.1 percent in monthly terms and 14.6 percent in the annual. The difference is giving trading giants an opportunity to export millions of barrels as shale output continues to surge.

Over the past 11 months, Brent crude is up 62 percent and West Texas Intermediate has risen 46 percent - but does that constitute an oil shock?

Total products supplied over the last four-week period averaged about 20.7 million barrels per day, up by 1.3 percent from the same period past year. Gas production was at 58.12 billion cubic metres (bcm) last month, or 1.87 bcm a day, versus 61.86 bcm in April.

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