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Oil rallies but further upside looks limited for now
OPEC has also gone all out to reassure the market that it will do whatever is needed to maintain market stability.
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A general view shows the Bangchak oil refinery in Bangkok, Thailand, October 3, 2017. (Reuters/Athit Perawongmetha/File Photo)
G
lobal oil prices rose to their highest levels in three-and-a-half years in the aftermath of United States President Donald Trump’s announcement that the US will pull out of the Iran nuclear deal. Further upside, however, looks limited.
Trump’s decision spooked the market, even though it was widely anticipated, because it comes at a time when the oil supply-demand balance is tightening.
Prices have been rising steadily since the start of 2018. The front-month ICE Brent crude futures contract has risen 18 percent and is now firmly perched above the US$77/b mark, and NYMEX crude futures has risen by close to 19 percent to above $71/b.
The Organisation for Economic Co-operation and Development (OECD) commercial oil stocks that have been declining are now just 30 million barrels above their five-year average, according to the International Energy Agency (IEA). Stocks fell by 25.6 million barrels month on month in February to 2.84 billion barrels — the lowest level since April 2015, IEA said in its April monthly oil market report.
