Economy

Crude Closes Near Three-Year High as Focus Remains on Iran Deal

Crude Closes Near Three-Year High as Focus Remains on Iran Deal

Iran is now the third-largest oil producing country, only trailing behind Saudi Arabia and Iraq, all members of the Organization of Petroleum Exporting Countries (OPEC). French President Emmanuel Macron's prediction that the US will pull out of the Iran nuclear accord stoked concerns about a renewal of sanctions that would slash crude exports from OPEC's third-largest producer.

West Texas Intermediate was up about 1% to $68.70 a barrel at 8:45 a.m. ET.

US crude oil production has shot up by more than a quarter since mid-2016 to over 10.54 million barrels per day (bpd), taking it past Saudi Arabia's output of around 10 million bpd.

USA oil major Chevron Corp has evacuated executives from Venezuela after two of its workers were imprisoned over a contract dispute with state-owned oil company PDVSA.

Trump will decide by May 12 whether to restore the sanctions, which would probably result in a reduction of Iranian oil exports.

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The supply side-driven increase in crude oil prices is likely to spur a major differentiation in emerging markets' performance, hurting large net oil importers with weak economic fundamentals, possibly by more than it benefits large net oil exporters, the brokerage said. Only Russia now produces more, at nearly 11 million bpd.

After API surprised markets with a 1.1-million-barrel build in crude oil inventories yesterday, the EIA reinforced the mood by reporting a 2.2-million-barrel build for the week to April 20.

The effect of EIA's latest inventory report on oil prices would be interesting to watch; API's figures seemed to remind market players that not all fundamentals are bullish for oil, with US oil production continuing to be the main headwind for OPEC's plans to push up prices higher.

Gasoline production averaged 9.9 million barrels daily last week, the EIA also said, and distillate production stood at 5 million bpd. The previous record-high was set the week ending March 30 at 2.175 million bpd. Bloomberg reports that some traders have already stopped signing contracts for Iranian crude whilst others have inserted clauses that allow them to stop taking oil from Iran if sanctions are reimposed.

Reuters had on Monday quoted traders as saying that the relatively high oil prices, coupled with the surging United States output, were making it harder to sell Russian, Nigerian and other oil grades in Europe, where the USA oil flooded.