Oil rallies to fresh 3-year high

Oil rallies to fresh 3-year high

The oil market is set to tighten further as supplies have been constrained by the earlier Vienna pact involving Saudi Arabia-led Opec along with non-Opec Russia to cut output by 1.5 million bpd, resulting in global crude inventories falling to 1 million barrels below a five-year average. He said that Brent crude oil could rise as high as $85 (£63) per barrel, but predicted that they would not drop below $69.70 (£52).

Refinery runs in March also jumped to a record as import quotas for the small independent refiners-the so-called "teapots"-were increased and refinery margins stayed healthy".

At the same time, China's domestic crude oil production has been languishing near June 2011 lows in the first quarter this year, prompting higher imports to meet growing demand. High oil prices and low finding cost in the region which has relatively shallow wells help drive exploration in the farm belt where an average well produces 40-50 barrels-a-day over a 15-20 year life span.

Analysts project that oil exports from Iran could be reduced by about 0.5 million barrels a day as South Korea and Japan trim their imports, said analysts for J.P. Morgan in a recent report. Steady refining margins and backlog cargoes to some independent refiners contributed to the record import volumes.

China is crucial to global oil demand growth, and if it keeps its current growth pace, it would support the strong demand growth that analysts expect. The coming USA sanctions pushed up oil prices last week after President Donald Trump withdrew the United States from the nuclear deal. With Japan and South Korea already indicating that they will aim to attain a waiver from the USA in order to continue buying Iranian crude, the impact of Trump's actions will rest on how far he goes in comparison with Obama's previous sanctions.

"In these early days, there is understandable uncertainty about (the) potential impact on Iran's oil exports" from the United States move, it said. "The API inventory data in the USA fits with. a topping pattern or at least a decent pause for oil prices at the moment", said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

Another possible risk to the global oil supply could come from crisis-hit Venezuela, the IEA said.