U.S. exporting more oil, but that could change

26 April, 2018, 00:26 | Author: Clarence Schmidt
  • E.A. Gibson Shipbrokers

"Concerns that the US may reimpose Iran sanctions and supplies from the country may be disrupted eased", Takayuki Nogami, chief economist at state-backed Japan Oil, Gas & Metals National Corp., said by phone from Tokyo.

Oil prices have been lifted by supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) which were introduced in 2017 to support market growth. "No good and will not be accepted!".

French President Emmanuel Macron is scheduled to visit the USA next week and is expected to encourage Trump to remain in the deal.

Growing U.S. demand, indicated by continued strong refinery utilization rates, is very supportive to prices, said Bob Yawger, director of energy futures at Mizuho. "We still have all the different soundbites on Iran and the May 12 deadline is coming up", Petromatrix strategist Olivier Jakob said, referring to an upcoming date by which the United States has said it will withdraw from a nuclear deal with Iran if the other signatories to the deal do not meet certain conditions.

"The recent rise in oil prices will lead to a short-term reduction of pressures on GCC governments' balances sheets by reducing fiscal deficits and slowing the build-up of government debt", analysts at Moody's said.

The SPR now contains about 665 million barrels of oil, enough to cover about 100 days of net imports, up from around 90 days in January 2017. That's creating headaches for US consumers who are paying 15 percent more for a gallon of gasoline than they were past year.

Meeting were ongoing in Saudi Arabia while Trump was tweeting.


A news report this week suggested Saudi Arabia would not mind seeing prices in the $80 to $100 a barrel range, up from around $68 now.

Economies with high income elasticity of demand also have high price elasticities, suggesting oil may be capped at $80/b.

Admittedly, the rise in fuel costs will eventually weigh on the disposable income of consumers and the profits of non-oil businesses. That's been credited with pulling oil from below $30 per barrel, but it's offset by US gains.

Crude oil is now at a three-year high that reflects concerns over geopolitical tensions in the Middle East, with the region accounting for almost half of global oil supplies. This has contributed to the strong economic performance in the US over the past two years.

He also accused U.S. President Donald Trump of not favouring lower oil prices, despite his criticism of OPEC's role in pushing up global oil prices on Friday.

Thomas Pugh is a commodities analyst for Capital Economics, an economic research consultancy based in London.

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