Crude oil prices continue to weaken on Friday, pointing to a weekly decline against expectations that US production will soon exert a more serious impact on the commodity markets.
The international variety Brent fell by 0.5%, to 70.38 USD per barrel, while the futures on the light US oil West Texas Intermediate (WTI) decreased by 0.24% to 61.66 USD per barrel.
The Brent variety is targeting a weekly price correction of 2%, while WTI has so far declined by nearly 2.5%. This will also be the second consecutive weekly decline.
Oil prices have declined as pressure from record levels of US production continues to weigh on the markets.
US crude oil production reached a record 12.3 million barrels per day last week, rising by roughly 2 million barrels per day in the past year. At the same time, raw material exports have passed the threshold of 3 million barrels per day for the first time this year, according to the data of the US Energy Information Agency (EIA).
Last week, US inventories reached their highest level since September 2017, rising by 9.9 million barrels to 470.06 million barrels, with production reaching a record 12.3 million barrels per day. At the same time, the activity of the refineries has decreased, according to the data of the Energy Information Administration (EIA).
In the US, analysts point out that supply will grow even further due to improved infrastructure for exports. Increasing production in the US helps compensate for declining supplies from other parts of the world, including Iran over the strengthening of US sanctions and Venezuela where the political and economic crisis continues to escalate.
According to the traders, the crude oil prices also fell due to Russia, which began shipping clean oil to Western Europe after several countries stopped their supplies last week due to a dirty product. In Poland, the government turned to its strategic reserves to ensure supplies.
At the same time, the Organization of Petroleum Exporting Countries (OPEC) is expected to maintain its policy of abridged mining. Oman’s Energy Minister, Mohammed bin Hamad al-Roumi, said on Wednesday that OPEC’s goal for the next meeting of the organization in June was to prolong the redundancies. However, despite the desire of many members of the cartel to maintain yield levels, it may still be necessary to take other actions.
The situation with Venezuela is likely to be heightened over OPEC debates and ministers will have to assess how many additional barrels may be needed to fill the growing supply gap caused by geopolitics.
Is there a serious shortage in oil markets?
Asia’s refineries are looking for additional quantities of crude oil from Saudi Arabia after started to experience serious supply violations due to shaken mining in Iran and Venezuela.
Big oil consumers demand additional supplies for June and July from the largest producer in the Organization of Petroleum Exporting Countries (OPEC), according to pre-agreed terms between refineries and Saudi Aramco state oil company.
The danger of a shortage in oil markets has increased after the US has ended the grace period for major Iranian oil buyers, threatening the sanctions and threatening them if continue to trade with Tehran. The unexpected supply disruptions in Russia and Nigeria, as well as the political turmoil in Venezuela, added further uncertainty.
During the last week, oil prices have been extremely unstable as analysts expected the corresponding response from Riyadh following the US administration’s call to Saudi Arabia to increase its yield. Although Saudi oil minister Khalid al-Falih said Riyadh would try to keep the balance on the market, he also hinted that OPEC and its allies would prolong the redundancies by the end of the year.
The oil market may suddenly lose 900,000 barrels per day because of the US sanctions against Iran, according to Goldman Sachs.
Crude oil and gas violations from Tehran and Caracas are expected to be offset by increased production from OPEC and Russia, with the US bank warning that it expects even higher oil prices in the coming months.
In April, US President Donald Trump wrote on Twitter that “Saudi Arabia and other OPEC representatives” will offset the gap that will emerge after tightening the sanctions against Iran.
Oil price forecast
At the beginning of the year, crude oil price growth has reached 50%, but prices are still unlikely to exceed 90 or 100 USD per barrel.
This week saw a 5% correction in oil prices compared to the previous week’s level, due to the rise in US oil reserves.
In recent times, when there is a rise in oil prices, there is also a rise in crude oil reserves in the United States.
In the longer term, there is nothing serious that would jeopardize oil prices and lead to their solid rise soon. The focus is on Iran, both Venezuela and Libya. However, looking at the data on world crude oil production, Iran, Venezuela, and Libya are not such an important factor.