Oil price is holding steady near $68 a barrel on Thursday. The reason behind this is that concerns of supplies from the Middle East region have somewhat receded. That is due to the possible exit of the United States’ President, Donald Trump, from the Iran nuclear deal. In fact, more than this, there are increased concerns on the American firms’ crude output, as well as, stockpiles. As far as India, this could ensure stable pricing of essential commodities as the rulers will face electorate next year.
Prediction of a Pull Out
There was little change in New York futures following a 0.5 percent expansion in oil price. Incidentally, France president, Emmanuel Macron, has predicted that Trump might pull out of the Iran agreement, BloombergQuint reported. There was a threat of sanctions on Iran being revived. That could mean supply disruption from the third biggest oil producer. However, the key point is that investors have mostly ignored the government report on crude production in the United States and the build in inventories, which came in as a surprise.
Significantly, the latest developments came on the back of crude rallying to hit three-year high earlier this month. That was due to geopolitical tensions in the Middle East region as Trump was pondering over the re-imposition of sanctions on Iran. The OPEC has been successful in restricting its output, the same cannot be said of United States. The production in America has exceeded 10 million barrels per day every week after early February. This continued to be a counter-productive to the Middle-East region’s efforts.
SEB AB chief commodities analyst, Bjarne Schieldrop, thinks that it is likely that the United States will dump the deal. On the other hand, he sees potentials for starting a fresh negotiation with a clean slate. Significantly, none of the other five countries have supported the American withdrawal of the deal with Iran. They were part of the initial deal. The French president thinks that the withdrawal could only increase uncertainty and tensions.
Interestingly, Macron comments came on the back of his proposal to add conditions with the objective of addressing several concerns of Trump. Currently, Iran has increased its production by approximately one million barrels per day compared to the sanctions period of 2012 – 2015.
The Energy Information Administration (EIA) in the United States disclosed crude stockpiles that jumped 2.17 million barrels last week. This is in contrast to an expectation of a 2.2 million barrel drop by experts. None-the-less, the oil production in the Americas has increased nine straight weeks to 10.6 million barrels a day. This is the biggest level in the weekly data compiled by the EIA since 1983.
On the NYMEX, West Texas Intermediate crude for June delivery gained 19 cents at $68.14 in the morning in London. This is on the back of the contract advancing 35 cents to $68.05 yesterday. However, total traded volume witnessed approximately 18 percent lower than the 100-day average volume. Similarly, June delivery of Brent crude expanded 0.3 percent or 24 cents to $74.24 a barrel on the European Exchange.