Oil Rises to New Three-Year Highs

Oil Rises to New Three-Year Highs

SEOUL, May 15 (Reuters) - South Korea's crude oil imports from Iran fell 12.1 percent in April from a year ago, while imports of Russian oil more doubled, customs data showed on Tuesday. The grade's cash discount WTC-WTM hit the lowest in four years earlier this month. Investors are watching whether OPEC and its allies such as Russian Federation intend to end output cuts and increase production if renewed American measures restrict the Persian Gulf state's exports.

The U.S. dollar surged Tuesday, weighing on oil prices.

Light sweet WTI Midland comes from the Permian basin, a region which was a key contributor to record shale oil production in June.

According to a report from OPEC, the global oil glut has been virtually eliminated.

Oil held gains near $71 a barrel after escalating conflict in the Middle East raised geopolitical risks and as most OPEC members cut output more than required last month.

So far this year, China has lived up to these expectations.

The bottleneck in North America likely contributed to a 4.9 million barrel rise in USA crude oil inventories, to 435.6 million barrels, that the private American Petroleum Institute reported on Tuesday.

Despite the dips, both financial oil benchmarks remained close to their November 2014 highs of $79.47 and $71.92 a barrel respectively, reached the previous day. Sharenow also estimated oil to go beyond the $80 level in the short term.

Source U.S. Energy Information Administration Short Term Energy Outlook May 2018
Source U.S. Energy Information Administration Short Term Energy Outlook May 2018

During the week from April 28 to May 4, the API reported a draw of 1.85 million barrels of crude oil. After reaching a bottom in late February around $3 per barrel, the Brent-WTI spread reached $5.15 per barrel in April, which was the highest level for the spread since January.

Iran now provides approximately 4 percent of global crude supplies and is the third-biggest manufacturer in the OPEC.

Stronger oil prices are also spilling into other markets.

Shanghai crude oil futures ISCc1 have recently seen a significant uptick in their trade volumes, which hit a record 250,000 lots last Wednesday, a day after Trump announced the U.S. was withdrawing from the 2015 Iran nuclear deal.

This is why the sanctions against Iran is going to impact Brent much more than it is going to impact WTI crude oil.

The drop in USA crude prices coincides with rising values for Middle East oil in Asia and has opened the arbitrage window, traders said.

The IEA attributes the decline to higher prices that are expected to dampen demand.

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