Home News Commodities Crude oil rises for a second consecutive day amid the tensions in...

Crude oil rises for a second consecutive day amid the tensions in the Middle East

Crude oil drilling

Share This On Social

Crude oil rises for a second day in a row following attacks on two oil tankers in the Gulf of Oman, which have raised fears of cutting crude oil flow through one of the key sea routes in the world.

Attacks near Iran and the Strait of Hormuz caused a 4.5% rise in oil prices yesterday, ending the downward trend in recent weeks over fears of demand.

This is the second time within a month that tankers are being attacked in the world’s most important oil supply area amid mounting tensions between the US and Iran. Very quickly yesterday, Washington accused Iran, but Tehran denied the allegations.

The futures on US crude oil WTI rose by 0.10% to 52.33 USD per barrel, while the Brent variety added 0.47% to 61.60 USD per barrel.

oil

Tensions in the Middle East escalated after US President Donald Trump withdrew the US from the nuclear deal with Iran and again imposed sanctions that mostly affect the country’s exports. Iran, which has distanced itself from previous attacks, said it was not worried from a war.

It is still unclear what caused the explosions, but Qatar has called for an international investigation of the attacks and to reduce tensions in the region.

The Strait of Hormuz in the Persian Gulf is an important waterway for the transport of crude oil and petroleum products. About 40% of the oil shipments pass through the strait.

Meanwhile, the Organization of Petroleum Exporting Countries has reduced its forecast for global oil demand growth as a result of trade disputes. In addition, OPEC indicated that there is a risk of a further reduction in demand, which is a prerequisite for the continuation of production constraints by the end of 2019.

The Organization and its allies must meet in the coming weeks to decide on their production policy. Some members of the cartel are worried about the sharp drop in prices.

Oil demand worldwide will grow by 1.14 million barrels per day this year, which is 70,000 barrels per day less than expected earlier, according to OPEC’s monthly report.

OPEC monthly report

The OPEC has said in its monthly report that tensions in international trade jeopardize oil demand, reduce its consumption forecasts and pave the way for new challenges. The crude oil production within the cartel declined in May by 236,000 barrels per day to a five-year low of 29.88 million barrels per day. OPEC pumped less than 30 million barrels of oil for the first time since June 2014.

The OPEC, whose meeting is due at the end of June, indicated that demand grew by less than 1 million barrels per day in the first quarter, a little below the latest forecast. At the same time, the world economy is heading for its worst annual growth in a decade because of the protracted trade war between the US and China. OPEC expects producers outside the cartel to increase their yields by 2.14 million barrels this year, which means that supply growth will be higher than demand.

“In the first half of this year, ongoing global trade tensions have increased, resulting in lower global demand for oil”, says the OPEC monthly report.

Oil prices entered in the bearish territory last week, sinking to less than 60 USD per barrel for the first time since January because of worries that weak demand will lead to increased stockpiles even if OPEC and its allies continue to restrict supply.

Although OPEC lowered its oil demand estimates in the first quarter, it retained its projections for the entire 2019, believing that consumption would accelerate for the rest of the year. World demand is expected to grow by 1.14 million barrels per day or 1.2% on average this year, compared with a forecast of 1.21 million barrels per day in the report last month.

It is also clear from the report that if OPEC keeps production at current levels, then global markets need to be tightened significantly in the third quarter, with about 1.3 million barrels per day. The production of its 14 members fell by 236,000 barrels per day to 29.9 million barrels per day last month after the US tightened its sanctions against Iran.

Production in Saudi Arabia has shrunk by 76,000 barrels per day to 9.69 million barrels per day. The country continues to pump well under its quota of 10.31 million barrels per day. Saudi Arabian Energy Minister Khalid al-Falih said in St Petersburg last week that the organization has agreed to keep its output limitations for the remainder of 2019 and expects only such a commitment from its ally Russia.

As the thriving American shale industry leads the US production to new records, the Minister of Energy of the United Arab Emirates has even pointed out that OPEC may have to limit supply in 2020.

Oil supplies from Iran and Venezuela continue to decline, with both countries affected by the US sanctions. In Iran, production fell by 227,000 barrels per day to 2.37 million barrels, while production in Venezuela fell by 35,000 barrels to 741,000 barrels per day. Nigeria, the largest producer in Africa, also saw a drop in production from 92,000 barrels per day to 1.73 million barrels per day. Production in Iraq and Angola is growing.

US oil rig count

The US oil and natural gas rigs totaled 1,053 for the week ended June 12, according to data by S&P Global Platts Analytics.

This represents a net increase of four rigs from the prior week’s total of 1,049. It also reverses two weeks of declines, as operators removed 25 rigs over that time.

The prolific Permian Basin saw the biggest rebound, adding eight active rigs to 448. It represents the first time since the week ended May 1 that the basin did not lose any rigs. The sustained lower rig count has allowed well completion activity to start to catch up with drilling in the past few months.