Oil prices move further upward

Oil prices move further upward

"Over the next few years, we expect tightness in one particular product-middle distillate-to lead to strength in one particular liquid, crude oil, and especially those crudes that look like Brent", said Martijn Rats, Morgan Stanley's global oil strategist, in a research note Tuesday.

It trimmed its 2018 world demand growth projection by 40,000 barrels per day to 1.4 million bpd, projecting total consumption at 99.2 million bpd.

"Given the uncertainty over trade, Iranian sanctions and various other geopolitical hot spots, people are making a bet that U.S. growth will outperform the rest of the world and that these companies will be less affected", he said.

The current rise of oil production is fueled by natural gas condensates and liquids, neither of which is used for producing the needed diesel. "It would be extraordinary if such a large jump did not affect demand growth, especially as end-user subsidies have been reduced or cut in several emerging economies in recent years".

Oil prices hit $80 a barrel on Thursday for the first time since November 2014 on concerns Iranian exports could fall, reducing supply in an already tightening market.

Robust oil demand together with supply curbs led by Opec and Russian Federation have coincided with a series of geopolitical crises over the past year pushing up prices towards $80 a barrel this week.

Spot crude oil cargo prices are at their steepest discounts to futures prices in years as sellers are struggling to find buyers for West African, Russian and Kazakh cargoes, while pipeline bottlenecks trap supply in west Texas and Canada.

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OIL STOCKS: Across Europe, oil companies were in demand amid higher oil prices. "As ever, the IEA stands ready to act if necessary to ensure markets remain well supplied".

On average over the past month crude oil imports averaged about 8.0 million barrels per day, 4.3% less than the same month previous year.

A rapid decline in Venezuela's crude production has further roiled markets in recent months.

"So I wouldn't be surprised to see $100 per barrel in the coming months". "Also if the USA can get China to loosen energy ties with Iran, then regardless of increased U.S. shale production, the price could close in on $100".

The IEA noted that Iranian oil exports now total about 2.4 million barrels a day.

A day after the American Petroleum Institute's crude oil inventory report put a restraint on oil prices, the Energy Information Administration pushed prices up again by reporting a draw of 1.4 million barrels for the week to May 11.

For now, the rapidly changing geopolitical landscape will move the attention away from stocks as producers and consumers consider how to limit volatility in the oil market.

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