Will Crude Oil Continue to Rise?

An oil pump is seen at sunset outside Vaudoy-en-Brie

"For all of these reasons, the geopolitical risk premium [of] oil prices continues to be strong, and [we think] oil prices will continue to grind higher".

The increasing backwardation is consistent with statistics from the physical market showing oil inventories are becoming increasingly tight.

OPEC and its 10 producer allies from outside the bloc appear to have all but accomplished their mission of reducing the overhang of OECD oil inventories back to their five-year average. There was a flat PCE chain price figure in March that beat the 0.1% CPI drop, though with the same 0.2% core price gains for both, and with respective increases that rounded from 0.034% and 0.153%.

Michael Poulsen: That's the million dollar question. Prices closed on their highs on Monday following Netanyahu's statement that the Israeli's had proof that Iran was trying to build a nuclear weapon.

"If Trump abandons the deal, he risks a spike in global oil prices", said Ole Hansen, head of commodity strategy at Saxo Bank, adding that reintroducing USA sanctions could remove 300,000-500,000 bpd of Iranian oil from global supplies. That compares with a 1.23 million-barrel gain forecast by analysts ahead of Wednesday's government data. Some portion of that potential loss of oil availability has already been built into prices. It also said that inflation is moving higher, nearing its target.

Iran, the third-largest oil producer in OPEC after Saudi Arabia, is now producing around 3.82 million b/d of crude oil, according to Platts estimates.

Michael Poulsen: Mainly countries in Asia that are dependent on Iranian oil, of course, depending if they can obtain a waver as stated for some portion of it last time around, then there will be less of an impact, but they'll have to find the oil elsewhere.

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A trader for a Mediterranean refiner that is an active buyer of Iranian crude said his company is already looking to buy Iranian oil for the next few months but if the USA imposes more banking restrictions then it will have to find alternatives. Are we talking about the usual suspects Russian Federation and America, will they pick up the slack?

Sputnik: What's your take on the consequences?

But the US-Iran relations throws up more uncertainty into the mix.

Even with the export boom, the rest of the US economy is still vulnerable to swings in the global market.

Crude production continued to rise, hitting a new weekly record of 10.62 million bpd.

Gas prices across the country have seen a spike in recent weeks. "So, given the constraints there, that actually sets up for a higher oil price as we go [further] into 2018", he adds. Is he making sense or is it just another way of scaremongering the industry?

The risk OPEC faces now is tightening world markets too sharply, and sending prices to levels that either crimp oil demand or provoke a new tide of rival supply from the U.S. As Angola's creeping decline adds to the ongoing slump in Venezuela, that danger only grows. Even if some of those refiners are not configured to process light grades, it can be used as a blend with other crude types, yielding higher profitable finished products like jet fuel, gasoline, kerosene and others.

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