Oil edges up as OPEC, Iran overshadow U.S. crude output

By Trend

Oil prices edged higher on Thursday despite swelling U.S. crude inventories and record weekly U.S. production, as focus shifted back to OPEC supply cuts and the potential of new U.S. sanctions against Iran, Reuters reports.

Brent crude oil futures LCOc1 were at $73.56 per barrel at 0947 GMT, up 20 cents from their last close.

U.S. West Texas Intermediate (WTI) crude futures were 25 cents higher at $68.18 per barrel.

Prices were pulled down in earlier trading by a Wednesday report from the U.S. Energy Information Administration (EIA) showing a 6.2-million-barrel jump in U.S. crude inventories C-STK-T-EIA.

But by European trading hours, the focus shifted to bullish factors, such as an increase in Saudi Arabia’s official selling price of its oil to Asia, according to Commerzbank analyst Carsten Fritsch.

“It may signal stronger-than-expected demand in Asia,” Fritsch said. “This, combined with constraints in (OPEC) production, could lead to higher prices.”

State-owned producer Saudi Aramco on Wednesday raised the June price for its Arab Light grade for Asian customers to a premium of $1.90 a barrel to the Oman/Dubai average, the highest since August 2014.

Additionally, the latest Reuters survey of OPEC production showed it pumped around 32 million barrels per day (bpd) in April, slightly below its target of 32.5 million bpd, due largely to plunging output in Venezuela.

Fritsch said the cuts, along with demand growth, were more than offsetting the increase in U.S. oil.

U.S. oil production rose to a record of 10.62 million bpd, putting it ahead of Saudi Arabia, the biggest OPEC producer.

Only Russia pumps more, at around 11 million bpd.

U.S. drilling for new production is also increasing, encouraged by rising prices following OPEC’s production curbs.

But the May 12 deadline for U.S. President Donald Trump to decide whether to continue waiving U.S. sanctions against Iran was also buffeting downward pressure on prices.

“Overall, we continue to trade a waiting game for the U.S. decision on Iran, waiting to have sanction headlines trigger some frenzied buying,” said Olivier Jakob, managing director of energy consultancy PetroMatrix.

Trump has all but decided to withdraw from the 2015 Iran nuclear accord by May 12, sources said, though exactly how he will do so remains unclear.

Iran re-emerged as a major oil exporter in January 2016 when international sanctions against Tehran were suspended in return for curbs on Iran’s nuclear program.