Oil prices are climbing amid reports of production disruptions in Canada, adding to concerns that Iran’s output will soon be removed from global markets even as Venezuela’s supply contribution is declining and Libya faces political uncertainty.
Nymex WTI crude oil futures for August were down 0.45 percent at US$72.43 a barrel at 7:47 A.M. SGT, after spiking from around US$70.66 in the previous session, while ICE Brent Crude futures for August were up 1.72 percent at US$77.62 at 5:57 A.M. SGT, according to Bloomberg data.
“Oil prices have received a solid boost after the United States stepped up the pressure on allies to cut off imports of Iranian oil from November. The upside was complimented by supply disruptions in Libya and Canada,” Lukman Otunuga, research analyst at FXTM, said in a note on Monday.
“With renewed geopolitical risk factors likely to stimulate concerns of supply disruptions, oil prices have scope to extend gains in the near term,” he said, adding that on the charts, if WTI tops US$73, it could head toward US$75.
U.S. commercial crude oil inventories, excluding the Strategic Petroleum Reserve, fell by 9.9 million barrels in the week ended June 22, from the previous week, to 416.6 million barrels, or 4 percent below the five-year average for this time of year, according to the Energy Information Administration.
Goldman Sachs reportedly pointed to an outage at a Canadian oil-sands facility as potentially leading to a North American oil shortage for all of July, according to a Bloomberg report.
Reuters reported that Syncrude Canada’s oil sands facility in Alberta would see production stay offline at least through July after a power outage last week, Reuters reported, citing a company spokesperson.
That followed another trigger to push oil prices higher: The U.S. was pushing allies to end all Iran oil imports by November 4, with no plans to consider waivers or extensions. The Trump administration violated the Iran nuclear deal last month; the deal had removed economic sanctions on Iran in exchange for giving up its nuclear program.
The Trump administration’s push to remove Iranian oil from global markets faces cognitive dissonance from U.S. President Trump’s complaints over Twitter that OPEC was letting oil prices rise too much.
The loss of Iranian oil production, coupled with declines in Venezuelan production — also due in part to U.S. sanctions — as well as disruptions in Libyan production may pressure supply and offset OPEC’s vaguely worded agreement over the weekend to increase production. It isn’t clear whether it’s technically possible for all of the OPEC nations to meet supply-increase goals.
In Libya, rival governments were vying for control of the country’s oil resources. Aljazeera reported on Wednesday that a renegade general captured two oil terminals and said the revenue from them would be given to an unrecognized administration, while the internationally recognized government was seeking U.N. help to block “illegal” exports.