Oil rises to 3½-year high, as U.S. crude inventory drops

Oil rises to 3½-year high, as U.S. crude inventory drops

The Guardian is reporting that USA -based cereal maker Kellogg says it is pulling out of Venezuela because of the economic deterioration in the country.

The IEA is anxious that we will see demand destruction because of higher oil prices.

Oil fell on Wednesday ahead of an anticipated rise in USA crude inventory that could provide more evidence that demand may be slowing in spite of ongoing crude output cuts by producer group Opec and imminent United States sanctions against Iran.

"In these early days, there is understandable uncertainty about its potential impact on Iran's oil exports, which are now about 2.4 mb/d", the IEA noted. Current conditions-with geopolitical unrest, unplanned supply outages, thin spare capacity, and rising demand-mirror the state of affairs in 2008 and 2011, when prices rallied into triple-digit territory.

On the New York Mercantile Exchange, June West Texas Intermediate crude added 35 cents, or 0.5%, to settle at $71.31 a barrel.

The sources told Reuters Saeed Khoshrou, director of worldwide affairs at the National Iranian Oil Company (NIOC), held separate meetings in Beijing on Monday with top executives at Chinese oil giant Sinopec's trading unit and state oil trader Zhuhai Zhenrong Corp to discuss oil supplies and seek assurances from the Chinese buyers. Our only caveat regarding the ongoing bull market is that traders should wait for a better entry price before buying the commodity.

These ruminations may presumably cause those keenly attuned to the cycles of a free market to wonder what the fuss is about: if the IEA's prediction of supply growth comes true, it would be the antidote to the high crude prices it is anxious about; and if a sudden tightening of supplies comes true and prices spike even higher, then OPEC and other countries seem ready to bring more product to the market.

Venezuela's situation grows increasingly worrying and the expected drop in production from Iran means that prices are expected to reach four-year highs once again.

More news: EU Must Defend Firms against US Iran Sanctions: Macron

Commerzbank and Emirates NBD had the lowest 2018 Brent price forecast at $69 a barrel, while Nomisma Energia had the highest forecast for the year at $75.41.

Markets are treading carefully around uncertainty over Iran's supply, however, and signs of ample supply kept a lid on price rises Wednesday. Since the European Union is unlikely to follow the re-imposing sanctions on Iran, the overall impact on the Persian Gulf state's exports will be "far more muted" than in the past, tanker tracker Petro-Logistics said in a note.

OECD crude inventories fell in March by 27 million barrels, putting total stocks at a three-year low and, crucially, 1 million barrels below the five-year average.

OPEC, on the other hand, raised their demand forecast by 25,000 bpd from the April report, to 1.65 million bpd. The call on OPEC crude and stockpiles will average around 32.25 million barrels a day for the remainder of 2018, about 600,000 higher than April output.

Venezuela's production is plummeting, and output is 550,000 bpd below it's agreed upon target as part of the OPEC deal.

The API reported that crude supply increased by 4.845 million barrels versus an expectation of a draw of 1.75 million barrels.

Is $100-$3.60 per gallon gasoline in the US -or higher possible?