Excess crude account swells as oil price leaps towards $80

Source U.S. Energy Information Administration Short Term Energy Outlook May 2018

Global oil supplies are plentiful enough to withstand a "significant reduction" in petroleum exports from Iran, according to a White House memo issued on Monday as the Trump administration prepares to reimpose sanctions on the OPEC member nation. "Oil has scope to appreciate this week on the back of OPEC output cuts, heightened geopolitical tensions, and optimism over stronger global oil demand".

The Organization of the Petroleum Countries said in its monthly report Monday that petroleum stockpiles in the developed world stand just 9 million barrels above the five year average - a sign that the glut that weighed on the market for years is almost gone. "If the complex can break above the multiyear highs set last week, the charts suggest we could see another 5-10% of upside near term".

Non OPEC countries are expected to pump about 59.62 million barrels a day.

The increase was mainly the result of higher crude production in Saudi Arabia - the world's largest crude exporter and the de facto head of OPEC - and Algeria, the report said.

Otunuga told Arab News that the price of oil has further room to rise this week.

The bloc's forecasts pushed oil prices to new three-and-a-half-year heights, building on last week's rally.

"Although oil could venture higher in the near term, robust production from United States shale remains a threat to higher oil prices", he said.

Brent crude was up 20 cents at 77.32 dollars a barrel by 1315 GMT and US light crude rose 10 cents to 70.80 dollars.

While the rising production figures are bearish clouds, "we're continuing to see the general momentum being brought forth, which has continued to point higher", said Ton Headrick, an analyst at CHS Hedging.

President Trump's decision to pull the US out of the Iran nuclear deal "constitutes a major geopolitical shift" which could trigger a move in the direction of "stagflation", a global strategy team at Citi, led by Mark Schofield, said in a research note, CNBC reported. Diesel futures rose 1.24% to $2.2496 a gallon.

Referring to President Donald Trump's decision to withdraw from the Iran nuclear deal, OPEC said: "So far, the impact on the global economy has been minor and negligible, but the build-up of potentially disruptive concerns has increased".

And reports suggest markets anticipate a sharp fall in Iranian crude supply once USA sanctions bite later this year.

Capital Economics analysts said OPEC is well-positioned to offset any fall in output from Iran caused by the re-imposition of sanctions on the country.

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