Oil is prepared for the longest quarterly profit in eight years, as fears over global supply disruptions overshadow OPEC's decision to ease its historical performance limits.
Futures in New York were up 13 percent in April to June period, rising for a fourth quarter in a row. Prices have risen more than 12 percent in the past two weeks as a harsher US stance on Iran threatens to cut exports to OPEC's third largest supplier. Concern is growing that the reduced production of the Persian Gulf will weigh on the production capacity of the producer group at a time when the market is already suffering from declining US inventories, a Canadian oil sands and turbulence in Libya
Production limits of the Organization of Petroleum Exporting Countries and their allies, which started last year, helped lower inventories below their five-year average in order to recover crude oil from its worst fall in a generation. While the cartel has since signaled that it will cut back after pressure from the US, prices remain elevated as its promise to boost production did little to alleviate worries about a supply shortage. This month, oil could record its biggest monthly gain since September and its best June rise since 2008.
"The market is intrigued by widespread supply disruptions from Iran, Libya to Canada, and rising US inventories." Lim Jaekyun, a commodities analyst at KB Securities Co., said by phone in Seoul. "It seems that OPEC's offer to increase supply is somewhat ignored by the market because of a looming global shortage, but as soon as we see OPEC's production increase, prices will stabilize."
West Texas Intermediate crude for August delivery was trading at $ 73.24 a barrel on the New York Mercantile Exchange, at 21 cents, at 7:47 am in London. The contract rose 69 cents to $ 73.45 on Thursday, rising 6.8 percent this week. Total traded volume was 32 percent below the 100-day average.
Brent for the August settlement, which expires on Friday, was down 8 cents at $ 77.77 on the London Stock Exchange ICE Futures Europe. The contract has increased by 0.2 percent this month. The global benchmark index was $ 4.53 for WTI in the same month.
The world's two major oil benchmarks diverge as Saudi Arabia intercepts supply gaps in the European market, while stocks in the US support futures in New York. The Brent to WTI spread fell nearly 60 percent this month, the lowest level since Thursday's 1965. The spread has collapsed since settling at $ 11.43 on June 7, the largest since February 2015.
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A market structure known as backwardation, in which short-term prices trade against later contracts, remained in place this month. WTI for settlement in August was $ 1.60 higher than the September contract, indicating a supply shortage after Syncrude Canada Limited. had cut the amount of customers following an unplanned outage in Alberta last week. Meanwhile, for short-term delivery, Brent was only 24 cents higher than later loads, a much lower premium than the American market.
In the US, the Energy Information Administration said nationwide inventories fell 9.89 million barrels last week compared to the expected 3 million barrels decline in a Bloomberg crisis. Inventories at the Cushing warehouse center in Oklahoma also shrank by 2.7 million barrels, while exports rose to the 3-million mark for the first time, despite concerns about a pipeline bottleneck in Perm.
Loyalists in Libya Following Khalifa Haftar, a commander in the east of the politically divided nation, they handed over control of ports with a combined export capacity of 800,000 barrels a day to a self-proclaimed National Oil Corp. in the eastern city of Benghazi. Recent clashes cost the country about 450,000 barrels per day and brought more oil out of the market just days after OPEC introduced an alliance agreement to increase production.
Oil Market News:
- Iran's position in Iran The oil market looks weaker than ever, and the dense network of US sanctions leaves the country with fewer friends and fleeing customers.
- The US The US Department of Energy pointed out that the US sanctions against Iran could give buyers of the oil of the Islamic Republic scope for a gradual decline.
- Futures rise at Shanghai International Energy by 0.6 percent to 494 yuan Stock Exchange, which seeks a third monthly advance since the debut of derivatives on March 26.
– With support from Tsuyoshi Inajima