Oil reclaims new multiyear highs as United States adds to sanctions on Venezuela

Oil reclaims new multiyear highs as United States adds to sanctions on Venezuela

BP Chief Executive Bob Dudley told Reuters he expected a flood of USA shale and a possible reopening of OPEC taps to cool oil markets after crude rose above $80 a barrel last week.

Brent crude futures rose by 0.7 percent to $79.06 a barrel, U.S. West Texas Intermediate (WTI) crude futures were at $71.86 a barrel, up 0.69 percent RIA Novosti reported. Trump had announced that he was pulling USA out of the Iran nuclear deal earlier this month. The cuts, which are set to expire at the end of 2018, were part of an effort to rein in a global supply glut that had weighed on prices since late 2014.

US crude stockpiles are forecast to have declined by 2.8 million barrels last week, which would be the third straight weekly fall.

"Trade is positive for energy demand", said Phil Flynn, analyst at Price Futures Group in Chicago.

Both supply and consumption keep increasing over time, but after oil prices fell due to oversupply, many less efficient oil suppliers turned off production and several oil-producing countries agreed to trim their production to restore higher prices, so global supply stayed relatively flat for a few years which allowed for global consumption to catch up.

Any restriction on Venezuela's financing, logistics or power supply could further depress the country's crude output.

Higher oil prices would also raise the fuel cost of airlines companies. However, if oil prices are pushed up by supply factors, it would be concerning.

Trita Parsi, the founder and president of the National Iranian American Council, which has advocated for the Iranian agreement, told UPI the US decision to ramp up the pressure on Iran has questionable ends. For example, the steps taken by the US President Donald Trump. Ed Markey (D., Mass.) has said Mr. Trumps foreign policy is driving prices higher and is calling to reinstate the oil-export ban, which was lifted in 2015.

The economist José Toro Hardy, who was a senior member of the PDVSA board before the arrival of Hugo Chávez, explained to the PanAm Post that the price increase will not benefit Venezuela, because the South American country has become a petroleum importer.

Some economists have argued that shipping oil overseas wouldnt contribute to higher prices at the pump. But, he added, he does not believe the market is near balance and, largely due to pipeline bottlenecks in the United States, not enough oil is coming onto the market.

Geopolitically, its a big net negative for the USA, since the main beneficiaries are countries that are at best frenemies and at worst flat-out threats. The "Oil Price Dynamics" report published by the Federal Reserve Bank of NY finds that less than two-fifth of the rise in oil prices since the beginning of 2018 was on account of supply-side factors.

Economically, expensive oil means tighter margins for businesses that operate with long supply chains. Higher oil prices will push the import bill higher; however, it will be partly offset by higher oil exports and better remittances. The experience of the 1970s, when gold and silver soared along with oil, gives cause for optimism.

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