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Oil dips on signs of ample supply despite OPEC cuts, Iran sanctions

Oil dips on signs of ample supply despite OPEC cuts, Iran sanctions

OPEC and its partners chose to extend its production cuts till the end of 2018 in Vienna on November 30, as the oil cartel and its allies step up their attempt to end a three-year supply glut that has savaged crude prices and the global energy industry.

Brent for July settlement rose 44c to $78.67 a barrel on the London-based ICE Futures Europe exchange, after Monday's $1.11 gain. The contract hit $78.22/Bbl earlier in the session, its highest level since November 26, 2014.

Since the accord was reached at the end of 2016, oil prices have climbed to their highest in almost four years to exceed $77 a barrel, up from $30 in early 2016.

Elsewhere, supply concerns have been mounting over the last week after President Donald Trump the USA pulled out of the Iran nuclear deal - a move that reimposes sanctions on Iranian barrels.

U.S. West Texas Intermediate crude oil was up 28 cents, at $70.98/Bbl, remaining below last week's 3½-year high of $71.89/Bbl, Kallanish Energy reports.

Now the United States has announced it will impose sanctions on Iran over its nuclear program, raising fears that markets will face shortages later this year when trade restrictions come into effect.

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Michael Wittner, an analyst at Societe Generale, forecasts USA sanctions will remove 400,000-500,000 BPD of Iranian crude from the global oil market, Reuters reported. American measures could cut the Persian Gulf nation's crude exports, and traders are watching whether OPEC and its allies will end their agreement to curb supply and increase production instead to fill in the gap.

Data from China's refineries showed that in April, these processed some 12.06 million barrels of crude daily, up 12 percent on the year and also the second-highest daily throughput rate on record, Reuters noted. "This time around, we expect much less of an impact".

US crude is trading at a hefty discount to Brent, the worldwide marker, thanks to sharp rises in USA production to 10.7 million bpd, which has left the American domestic oil market well supplied.

Saudi Arabia, OPEC's de-facto leader, last month pumped the least crude since the output-cut deal began in early 2017.

On the other hand, US production is growing at a pace that made traders hesitate last week after Baker Hughes reported yet another increase in drilling rigs.

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