Crude oil prices are down on Friday amid expectations that OPEC will soon increase yields to offset the decline in Iranian exports after tightening of the US sanctions against Tehran.
However, oil prices are heading to their longest series of weekly rises over the years, thanks to the tightening of oil markets amid falling supplies and growing geopolitical worries, coming mostly from the tensions between the US and Iran.
Futures of the international Brent oil fell by 0.17 USD to 74.18 USD per barrel. The contracts on US light crude WTI depreciated by 0.32 USD from 64.89 USD per barrel.
Brent’s price rose above 75 USD per barrel on Thursday for the first time this year after Germany, Poland and Slovakia froze Russian oil imports through a large oil pipeline, due to its poor quality. The move cuts off parts of Europe from the large supply route.
WTI is set to record eighth consecutive weekly growth, which is its longest series since the first half of 2015. Meanwhile, Brent may mark the fifth consecutive weekly price increase, which is the longest series since April 2018.
Oil prices are rising against a contraction in supplies agreed by the Organization of Petroleum Exporting Countries (OPEC) and US sanctions on Venezuela and Iran. The futures on crude oil have risen by about 40% since the beginning of the year.
Tightening of US sanctions against Iran
On Monday, Washington announced that it would end all the exceptions to sanctions against Iran and demand countries to suspend imports of “black gold” from Tehran in May.
To offset the shortage of Iran, the US has pressed the OPEC’s leader Saudi Arabia, as well as allies such as Iraq and the UAE, to put an end to voluntary supply constraints.
Jefferies Bank said a drop of 500-600 thousand barrels per day now seems realistic for Iranian oil exports and added that “at least China and possibly India and Turkey will continue to import Iranian crude oil”.
“OPEC will compensate the shortage”, said the US investment bank.
Earlier, Saudi Arabian Energy Minister Khalid Al-Falih said that they would make sure that the global oil market remained balanced and hinted at supplying the market to match the demand.
Despite the US efforts to reduce Iranian oil exports to zero, many analysts expect a certain amount of “black gold” to keep coming out of the country. “A total of between 400,000 and 500,000 barrels per day of crude oil and condensate will continue to be exported”, according to FGE Energy Consulting. This is a drop from around 1 million barrels per day at the moment.
China, the largest buyer of Iranian oil, officially expressed its dissatisfaction with the United States this week because of its unilateral sanctions against Iran.
US crude oil inventories
The Energy Information Administration reported a build in crude oil inventories for the week to April 19.
The inventories had risen by 5.5 million barrels in the seven-day period two days after the United States announced it would be cancelling the waivers it had granted eight oil importers so they could continue buying crude from Iran.
The EIA also reported that gasoline inventories had shed 2.1 million barrels in the reporting period, with distillate fuel stockpiles 700,000 barrels lower than a week earlier. These compared with a decline of 1.2 million barrels in gasoline inventories and a 400,000-barrel reduction in distillate fuel inventories in the week prior.
Refineries last week processed an average 16.6 million barrels per day, producing 9.8 million barrels per day of gasoline and 5.1 million barrels per day of distillate fuel. A week earlier, the average daily throughput was 16.1 million barrels per day, with gasoline production at 9.9 million barrels per day and distillate fuel production at 4.8 million barrels per day.