Oil price surge to constrain demand growth, says IEA

Oil hits high

Retail gasoline prices are up 6 percent since the start of the month and, while a switch to a more expensive summer blend is contributing to the rise, the decision by U.S. President Donald Trump to walk away from the Iranian nuclear agreement was a supporting factor.

West Texas Intermediate crude for June delivery dropped as much as 49 cents to $70.82 a barrel on the New York Mercantile Exchange, and traded at $71.08 as of 8:49 a.m. local time.

Brent, a crude reference in Europe, has reached 80.18 dollars per barrel, compared to 79.28 of Wednesday's closing.

Global oil stocks in the Organization for Economic Cooperation and Development countries hit their lowest level in three years in March, the International Energy Agency said Wednesday.

"Though Iran is unlikely to give back all the production gains charted since the [Joint Comprehensive Plan of Action] nuclear deal removed sanctions in 2016, they are likely to see steady declines ahead, joining Venezuela in the ranks of OPEC members suffering from involuntary production losses", said Fraser. Current crude exports from Iran are around 2.6 million barrels per day; over one million barrels higher than the 1.5 million exported under the sanctions imposed by Barack Obama in 2012.

Prices maintained support, however, from tight supply and planned USA sanctions against Iran that are likely to restrict crude oil exports from one of the biggest producers in the Middle East.

"The geopolitical noise and escalation fears are here to stay".

Oil stocks were expected to drop further as the peak summer driving season nears, offsetting increases in USA shale output, said analysts at Bernstein.

Crude stocks fell by 1.4 million barrels last week, nearly double the 763,000 barrel drop expected by analysts.

The result has been a widening difference between USA crude and benchmark Brent.

"The recent jump in oil prices will take its toll", said the IEA, which advises most major economies on energy policy.

Leading production increases is the United States, where crude output C-OUT-T-EIA has soared by 27 percent in the last two years to a record 10.72 million bpd, putting it within reach of top producer Russia's 11 million bpd.

Brent crude is edging towards $80 per barrel as U.S. stockpiles fall and amid worries of potential oil supply disruptions from Venezuela and Iran.

Goldman Sachs, though, said even with a slowdown in demand and soaring USA output, global oil markets would remain tight.

Iran's oil production has declined and is expected to continue to do so when United States sanctions are reimposed and Venezuela's production has also reduced dramatically as the country has not invested enough in its industry.

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