Crude oil prices rose slightly today amid the developing political crisis in Venezuela, tightening of US sanctions against Iran and the OPEC+ quota deal. However, the global markets are under pressure from the rising US inventories.
European market quotations of London’s Brent oil rose by 0.49 USD, or 0.6%, to 71.59 USD per barrel at 07:25 a.m. ET. The American variety West Texas Intermediate (WTI) appreciated by 0.34 USD, or 0.5%, to 63.63 USD per barrel.
Trade was limited, as May 1 is a holiday day in a number of countries around the world.
US crude oil inventories rose by 6.8 million barrels to 466.4 million barrels in the week ending April 26, according to the data of the American Petroleum Institute (API).
But the market focus is shifting to the crisis in Venezuela, where there is a conflict between President Nicolas Maduro and opposition leader Juan Guaido. Many observers fear that this could lead to escalating violence and further disturbances in the supply of crude oil. Juan Guaido called for the demonstrations against President Nicolas Maduro to continue today, a day after soldiers passed on his side.
We recall that since the beginning of the week, oil prices edged down, suppressed by the expectation that rising US and OPEC output will offset most of the shortfall following the US sanctions against Iran.
Oil markets have already tightened this year due to supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) as well as US sanctions on Venezuela and Iran.
Washington is set to revoke waivers for select countries to import Iranian oil on Wednesday and says it aims to drive down Iran’s crude exports to zero.
OPEC meets in June to discuss production policy. While Washington has demanded the group increase output to make up for the shortfall from Iran, OPEC’s de facto leader Saudi Arabia said on Tuesday it had no immediate plan to do so.
US oil inventories
The US crude oil inventories rose by 6.8 million barrels to 466.4 million barrels in the week ending April 26, according to the data of the American Petroleum Institute (API). The US oil stocks are swelling due to an upswing in crude inventories. Including this week’s data, the net build is now 18.11 million barrels for the 18-week reporting period so far this year.
The API this week reported a draw in gasoline inventories as well for the week ending April 26 in the amount of 1.1 million barrels. Analysts estimated a draw in gasoline inventories of 1.005 million barrels for the week.
Distillates fell by 2.1 million barrels for the week.
US crude oil production as estimated by the Energy Information Administration showed that production for the week ending April 19—the latest information available—resumed its all-time high of 12.2 million bpd.
The US Energy Information Administration report on crude oil inventories is due to be released on Wednesday at 10:30 a.m. EST.
Tightening US sanction against Iranian oil exports
Asia’s crude oil imports from Iran rose to the highest in eight months in March as buyers rushed for more cargoes to take advantage of waivers to the sanctions the United States imposed.
Asia’s top oil importers China, India, Japan and South Korea imported a total 1.57 million barrels per day of crude from Iran in March, up 36% from the previous month to the highest since July, the data showed.
The total import volume for the first quarter is 31% lower than the same period a year ago, according to the data. Iranian oil exports will reach Japan, South Korea, India and China in April but only China has Iranian oil arriving in early May.
India has to stop importing oil from Iran from tomorrow after the US ended its waiver to friendly nations on dealing with Tehran. The US in November last year scrapped a multi-nation nuclear deal with Iran and re-imposed sanctions, which also does not grant exemptions to any oil customers of Iran.
India, however, was among the eight countries that got a waiver from the sanctions for six months, which has ended now – bang in the middle of the national election. India will now import oil from the UAE, Saudi Arabia and the US.
Iran is the third-largest supplier of oil to India, and importantly, it came with benefits like free shipping and rupee payments, which are unlikely to happen now with others.
Consultancy FGE said Iran will still get some 200,000-300,000 barrels per day of oil smuggled out on land via Iraq, Pakistan and perhaps Turkey while Chinese trading company Zhuhai Zhenrong may continue to lift Iranian oil. The new tougher stance from the US implies that exports will likely be some 300,000-400,000 barrels per day lower than we previously expected.