Crude oil prices are rising on Wednesday amid the tightening US sanctions against Iran and Venezuela, as well as continuing OPEC supply constraints, which keep the market relatively tight.
The futures on US crude oil WTI rose by 0.68% to 61.82 USD per barrel, while the Brent variety is appreciating by 0.46% to 70.20 USD per barrel.
Analysts say the sanctions against Iran and Venezuela keep the world oil markets tightened.
Crude oil imports to China rose in April to 10.64 million barrels per day, according to Chinese Customs. This is an 11% increase over the same month last year. The country is the largest importer of oil in the world. The latest data also shows that China’s oil imports in the first four months of the year averaged around 10.03 million barrels per day, up 8.9% from the same period last year. The rise in oil demand in China is happening at a time when supply is limited.
The United States has restored sanctions against Iran in November last year, but tightened them since early May, ending the exceptions for some importers. The country, however, said it would oppose sanctions and continue to export oil. Most analysts expect Iranian oil exports to drop to just over 500,000 barrels per day, compared with 1 million barrels per day in April.
Washington has also imposed sanctions against Venezuela, which further distorts crude oil supplies. US sanctions, however, come against the Organization of Petroleum Exporting Countries (OPEC) supply tightening since the beginning of the year to support oil prices. However, there is an expectation that Saudi Arabia will increase its crude oil production to meet the needs of the market.
OPEC will meet in Vienna at its headquarters in June to discuss the production policy by the end of the year.
Higher oil prices on Wednesday partly offset the declines from previous days, which was triggered by information that the US would increase duties on Chinese imports this Friday.
At the same time, the Energy Information Administration lowered its 2019 forecast for world oil demand growth by 20,000 barrels per day to 1.38 million barrels per day.
Increasing oil production in the US may soon ease the tightened global market. For this year, the US production is expected to reach an average of 12.45 million barrels per day. By comparison, current levels are 12.3 million barrels per day, which is also a record.
For 2020, the Energy Information Administration predicts US production will reach an average of 13.38 million barrels per day, turning the United States into the world’s largest oil producer after Russia and Saudi Arabia.
US oil inventories
The American Petroleum Institute (API) reported a build in crude oil inventory of 2.81 million barrels for the week ending May 3, coming in over analyst expectations of a 744,000-barrel buildup in inventories.
Last week, the API reported a surprise buildup in the crude oil of 6.81 million barrels. A day later, the EIA reported an even larger build of 9.9-million-barrels.
Including this week’s data, the net build is now 20.92 million barrels for the 19-week reporting period so far this year.
The API this week reported a draw in gasoline inventories for the week ending May 3 in the amount of 2.833 million barrels. Analysts estimated a draw in gasoline inventories of 917,000 barrels for the week.
Distillates fell by 834,000 barrels for the week, while inventories at Cushing gained 618,000 barrels.