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Brent Crude Hits $80 Amid Concerns Over Iran Supply

Brent Crude Hits $80 Amid Concerns Over Iran Supply

But not everyone is bullish on the oil market.

Non-OPEC supply capex down 42 percent from 2014.

The implications for oil prices are massive... Brent crude futures were at $79.40 per barrel at 0617 GMT, up 0.14 percent from their last close after marking their highest in more than 3-1/2 years. Brent crude is now above $78.10. Further, any response will reduce spare capacity in an increasingly tighter market.

Venezuela and Nigeria are among the cartel members beset by political turmoil, while Iran may be hit with harsh United States sactions that could effect the oil industry.

OPEC is working to drain a surplus from the market through coordinated production cuts. South Sudan oil production has fallen from 500,000 to 130,000 barrels per day. Backwardation seems one of the most reliable signs of tightness in the market. Crude oil inventories (-2.2m vs. -1.0m expected) were lower than expectations.

Geopolitical issues are drawing the market focus away from more fundamental issues like supply and demand metrics, the International Energy Agency said.

The removal of energy subsidies in big consumer economies in recent years, such as those in India, could mean rising prices have a bigger impact on demand, the IEA said. That's old news. In fact, oil stockpiles started to decline about one year ago, according to the U.S. Energy Information Administration.

On Wednesday, the EIA reported that USA crude inventories fell 1.4 million barrels last week, while domestic production rose to 10.7 million barrels a day.

US West Texas Intermediate (WTI) crude futures were at $71.68 a barrel, up 19 cents, or 0.3%, from their last settlement.

The CEO of French oil giant Total said on Thursday he "wouldn't be surprised to see US$100 per barrel" in the coming months. Capital expenditures in non-OPEC grew by only two percent in 2017, and are still 42 percent below 2014. Probably, the investors are pricing in the sentiments.

It has taken 500 days and the sacrifice of nearly a billion barrels in lost oil output for the global crude market to eradicate a deep supply surplus, but oil prices have now hit OPEC heavyweight Saudi Arabia's desired level of $80 a barrel.

In April, Chinese crude oil imports set a new record-at 9.6 million bpd they beat the previous daily record of 9.57 million bpd from January this year.

Is $100-$3.60 per gallon gasoline in the US -or higher possible? In this case, USA drillers are already mobilizing to supply the markets with more crude.

On balance, the report is tending more to the negative side. Oil prices are sure to keep climbing. There's no guarantee that the Saudis will step in to increase production and make up for Iran's lost barrels-after all, the Kingdom has not expressed concerns over the declines in Venezuela. Other OPEC officials, meanwhile, have expressed complacency. The OPEC Reference Basket of Crudes (ORB) is made up of the following: Saharan Blend (Algeria), Girassol (Angola), Oriente (Ecuador), Zafiro (Equatorial Guinea), Rabi Light (Gabon), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (UAE), and Merey (Venezuela).

A surge to triple digits is not guaranteed, of course.

India's 2018 Iran oil purchases fell because of lower intake by state refiners in the March quarter.

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