OPEC's success with the oil production cutting deal has been to a significant extent aided by Venezuela's catastrophically dropping production as the country grapples with foreign exchange shortage, USA sanctions, and a devastating economic crisis.
"WTI is expected to be relatively weaker versus other benchmarks on the back of growing Cushing stockpiles and increasing domestic production in the USA", said Virendra Chauhan, an analyst at industry consultant Energy Aspects Ltd., referring to the largest American storage hub. "Demand for oil has been revised downwards for the second half of the year from April", PVM Oil Associates strategist Tamas Varga said. The rising oil prices are also giving the government a headache as a chunk of its annual budget will now be required in its purchase, thereby compromising on other social sectors.
So far this year, China has lived up to these expectations.
The agency estimates that global oil inventories fell an average of almost 0.6 million barrels per day (bpd) in each of the past five quarters (January 2017 through March 2018).
Refinery runs in March also jumped to a record as import quotas for the small independent refiners-the so-called "teapots"-were increased and refinery margins stayed healthy".
During the week from April 28 to May 4, the API reported a draw of 1.85 million barrels of crude oil. Steady refining margins and backlog cargoes to some independent refiners contributed to the record import volumes.
Source U.S. Energy Information Administration Short Term Energy Outlook May 2018
The pending USA sanctions against Iran have also contributed to the price rise.
"In these early days, there is understandable uncertainty about (the) potential impact on Iran's oil exports" from the U.S. move, it said.
As a supply loss in collapsing Venezuela and a potential decline in Iranian oil exports push oil prices up, the pace of demand growth in China could drive global demand growth higher.
"The commitment of Saudi Arabia and the rest of OPEC to the production cuts is a major factor in supporting the price at the moment as well as the possibility of reduced exports from Iran due to sanctions", said William O'Loughlin, investment analyst at Rivkin Securities.
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