Oil is set for the longest run of weekly gains in seven years as concern over supply disruptions from the Middle East to Venezuela grows and a global glut dissipates.
Brent is heading for a sixth weekly advance after topping $80/bbl for the first time since 2014 on Thursday. Renewed U.S. sanctions on OPEC producer Iran and shrinking supplies from Venezuela have buoyed crude’s recent rally. The International Energy Agency said OPEC and its allies have finally eliminated a global surplus, adding to the bullish signs.
“Oil has a lot of good things going for it in these times,” says Jens Pedersen, a senior analyst at Danske Bank. “There’s the Iran story which continues to develop and the general talk about a tighter market. It will be interesting to see if we make a clean break of $80 next week. It seems like that’s the direction we are going. ”
Supply concerns have led Goldman Sachs Group Inc. to say the market could be heading for a shortfall. Investors are watching for clues on whether the Organization of Petroleum Exporting Countries and Russia will ease their supply-curb agreement and instead raise output to fill any deficit. Still, crude at more than three-year highs could end up slowing demand growth, according to the IEA and Total SA.
Brent for July settlement added 35 cents to $79.65/bbl on the London-based ICE Futures Europe exchange. Prices are up 3.3% this week. The benchmark traded at a $7.98 premium to West Texas Intermediate for the same month, after the spread rose the highest since March 2015 on Thursday. While Brent has rallied on political risks, supply bottlenecks in the U.S. are deepening WTI’s discount, Pedersen said.
WTI for June delivery was at $71.57/bbl on the New York Mercantile Exchange, up $0.08, and is headed for a 1.2% advance for the week.
U.S. President Donald Trump last week reimposed sanctions on Iran, a move that could cut exports from the third-biggest producer in OPEC. The decision has roiled markets and is a reason “why you see the oil price going up and up and up,” Total’s CEO Patrick Pouyanne said Thursday.
While some European and Asian refiners and traders are already looking to replace Iranian barrels, the European Union, which opposes the U.S. move, pledged this week to salvage the accord and maintain oil shipments from the Persian Gulf state. World Oil
