LONDON – Oil prices rose Friday morning amid growing signs of a global supply deficit, with crude holding on to four-year highs.
Brent crude, the global benchmark, was up 0.37 percent to $81.68 a barrel on London’s Intercontinental Exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.19 percent at $72.25 a barrel.
Overall, the market has been bolstered by declining Iranian crude exports ahead of US economic sanctions against the Islamic Republic’s oil industry, set to take effect Nov. 4, analysts say.
“Iranian oil exports are falling faster than expected,” said Giovanni Staunovo, commodity analyst at UBS Wealth Management.
Officials at the state-run National Iranian Oil Co. have said they provisionally expect crude shipments to have dropped to about 1.5 million barrels a day this month, compared with 2.3 million barrels a day in June, according to people familiar with the matter.
In May, United States President Donald Trump pulled the US out of a 2015 international agreement to curb Iran’s nuclear program, setting the stage for the reimposition of economic sanctions.
At the same time, the oil market has been bolstered because the US “is not planning to tap its strategic oil reserves and Saudi Arabia is taking a rather passive approach” to filling the gap left by the Iranian shortfall, Staunovo explained.
The Organization of the Petroleum Exporting Countries – de facto under Saudi Arabia’s leadership – and its production allies, including Russia, agreed at a meeting in Algiers on Sunday to adhere to current production quotas first implemented at the start of 2017.
That means continuing a gradual ramp-up in production the producers had agreed to at the start of the summer in an effort to bring down overcompliance with the initial agreement.
But the producers declined to announce specific plans to raise production further, as many market participants had anticipated, seemingly defying calls by Trump for the cartel to increase output in order to put a cap on prices – sending the cost of a barrel soaring Monday, comfortably above the symbolic $80 threshold.
Now, the “ascent in oil prices shows few signs of capitulating,” said Stephen Brennock, an analyst at brokerage PVM Oil Associates Ltd.
Oil market participants are looking ahead to data from the US Energy Information Administration on Friday on US production for July, as well as weekly data from Baker Hughes on the number of rigs drilling for oil in the US – a key barometer of activity in the sector.
Among refined products Thursday, Nymex reformulated gasoline blendstock – the benchmark gasoline contract – was up 2 percent at $2.04 a gallon.
ICE gasoil, a benchmark for diesel fuel, changed hands at $717.00 a metric ton, up 0.60 percent from the previous settlement.