WTI Crude Oil Price Rose On Middle East Tensions, Expectations of a Tighter Future Supply


· WTI crude oil price increased by 18.41% to $58.16 per barrel

· Disappointing US economic growth; Euro-zone continues recovery

· Total oil demand growth stands at 1.18mnbpd in 2015

· OPEC crude output averaged 30.84mnbpd

WTI price rises on Middle East tensions and expectations of a tighter future supply

WTI crude oil price increased by 18.41% during since 15th of  April to $58.16 per barrel. The price hit its highest level for this year at $60.93 on 6th of May on the notion that a supply glut was easing from tightening world production, weaker US Dollar and signs that US oil inventories begun to level off in recent weeks as domestic production eased and refinery demand picked up. Further support came as fights in Yemen intensified and US-led airstrikes targeted Islamic State militants in Syria, creating more tensions over the security of Middle East oil supplies. However, prices could be negatively affected due to disappointing US economic growth in the first quarter and signs OPEC had no intention of slowing output.

US economy slows down; Euro and Japan still show potential

US economy grew at a barely discernible annual rate of 0.2 percent in the January-March quarter, battered by a triple whammy of harsh weather, plunging exports and sharp cutbacks in oil and gas drilling. That is the poorest showing in a year and down from 2.2 percent growth in 4Q14. Moreover, US consumer confidence fell in April to the lowest level in four months, knocked down by a slowdown in hiring, along with industrial production falling for a fifth straight month in April, weighed down by declines in mining and utilities output. On the positive side, the housing market continues to recover and unemployment rate fell to 5.4%. However, Euro-zone continued to show a moderate improvement as GDP rose 0.4% in 1Q15 and a 1.0% YoY, the fastest rate of growth in almost two years, while the industrial production in the region increased.

OPEC crude output averaged 30.84mnbpd

Total OPEC production averaged 30.84mnbpd in April, up from 30.82mnbpd the previous month, according to secondary sources. Crude oil production ex-Iraq was at 27.17mnbpd in April, an increase of 0.02mnbpd from March. The increase mostly came from Saudi Arabia, Iraq and Iran, in addition to Nigeria which has shipped more cargoes in April due to a return to a more typical export rate from its largest crude steam, Qua Iboe. However, the largest drop was from Angola as the outages at BP’s Saturno and Plutonio fields contributed to the drop. According to direct communication, Saudi Arabia told OPEC that it raised output to the highest rate on record near 10.31mnbpd in April; a sign the kingdom has started to claw back its market share.

Non-OPEC supply to average 57.16mnbpd in 2015, growth of 0.68mnbpd

Non-OPEC oil supply in 2015 is projected to grow by 0.68mnbpd to average 57.16mnbpd, little decrease from the previous report. Uncertainty in the production growth outlook for the coming period remains due to low oil prices expectations and a declining number of rigs drilling in the US. The latest report from oil services firm Baker Hughes Inc showed US oil rig count declines to lowest since August 2010 (which showed a fall for 23 weeks in a row). Non-OPEC supply is expected to grow mostly in 1H15. US production is expected to average 13.56mnbpd in 2015, while FSU and Latin America are anticipated to average 13.35mnbpd and 5.12mnbpd, respectively.


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