Oil Prices Steady as Brent Creeps Closer to $80 a Barrel

Oil steadied on Friday as Brent crude is creeping closer to $80 a barrel, a level not seen since November 2014. In addition, supplies tighten while demand remains strong.

Brent oil Futures for July delivery were at $79.59 per barrel, up 29 cents, or 0.37%. Brent broke through $80 for the first time on Thursday.

US West Texas Intermediate (WTI) crude futures were at $71.62, up 13 cents, or 0.17%, from their last settlement.

oil barrels stacked on top of each other with a blue sky as a background
Unexpected fall in US inventories sent prices higher.

Shanghai Crude Oil WTI Futures for September delivery were up 2.03% at 486.50 yuan.

Geopolitical risks continue to drive up prices, and an unexpected fall in US inventories pushed them up further.

US crude inventories fell by 1.4 million barrels in the week to May 11 and gasoline stocks fell by 3.79 million barrels.

Additionally, US crude is increasingly appearing on global markets as a result of its soaring production.

Meanwhile, crude prices have received broad support from supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC).

“Global inventories are approaching long-run averages, suggesting that the coordinated OPEC/non-OPEC supply cuts have been successful,” said Jack Allardyce, oil and gas research analyst at Cantor Fitzgerald.

Similarly, strong demand and falling output from Venezuela and an announcement to renew sanctions against Iran helped pushed Brent by 20% since the start of the year.

Approaching US sanctions against Iran raised worries that oil markets will encounter shortages later this year when trade restrictions take effect.

Moreover, production in Venezuela plummeted to 1.5 million barrels last month. It was the lowest in decades due to its ongoing economic crisis.

“Strong global demand, an ongoing OPEC supply deal, and a rising tide of geopolitical risk” have all combined to push prices higher, said Robbie Fraser, commodity analyst at Schneider Electric. “Among those risks, Iran continues to top the list, with questions remaining around the extent to which a return of US sanctions will limit Iranian oil production.”

Brent Prices forecasts

Brent prices have advanced 20% in 2018. Output cuts from major producers and increased tension in the Middle East has boosted prices.

“I think there’s more upside at the moment than downside, the new range is $72-$85,” said Michael Hewson, chief market analyst at CMC Markets. He added that he “wouldn’t rule out” $90 Brent this year.

Morgan Stanley raised its Brent price forecast to $90 per barrel by 2020. And Barclays expected average prices of $70 per barrel Brent for this year and of $65 a barrel for 2019. These were higher from forecasts of $63 and $60 per barrel previously.

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