Oil prices experienced a boost on Friday session after US President Donald Trump made remarks regarding implementing sanctions on several Iranian entities. This remark has made geopolitical tensions between the two countries.
According to reports, the sanction on Iran can help oil edge up in 2017. Iran’s recent Tehran ballistic missile test could lead to Trump reject Iran’s positive quarterly certification, which is a requirement for the continued waiver of US congressional energy sanctions.
If Iran, third largest oil producer among OPEC members, will receive such sanction, this could lead to removal of Iranian oil from the market and potentially reduce supply which could eventually lead to price surges.
Brent crude futures were up by 45 cents, or 0.08%, to $57.01 per barrel on early Friday session. March futures climbed 0.6% to $53.88 a barrel or $0.43 increase in the Globex electronic session. Meanwhile, US West Texas Intermediate climbed $0.29, or 0.5%, to $53.83 per barrel. On Tuesday, US crude futures were down to as much as $0.34.
The Organization of the Petroleum Exporting Countries and several other major oil-producing countries agreed last November to cut oil output which began on January 1. OPEC members were required to cut 1.8 million bpd, while non-members were to cut 558,000 bpd.
A review of the output cut is set to take place in 6 months on June in order to assess the effectiveness of the deal.
Russia, included on the OPEC output cut, stated recently that Russian oil companies may cut their oil production faster than the original agreement.
Although OPEC members are seen to comply with the said agreement, the price of oil is still not trading above $60, the desired price reach for the energy. This was due to the unexpected rising of US oil inventories recently.
“The upward pressure on oil prices has been partly offset by rising US production since October last year, which is expected to continue for the rest of 2017,” said the National Australia Bank.
According to the Energy Information Administration’s forecast, they believe that it is highly likely for US inventories to increase from an average of 8.9 million barrels per day in 2016 to 9.3 million barrels per day in 2018.
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