The $100 a barrel oil wager comes back to the options market

Ann Santiago
May 27, 2018

Oil prices were mixed Wednesday as USA data showed big increases in crude and fuel stockpiles and as investors weighed whether the Organization of the Petroleum Exporting Countries could ramp up crude production.

A barrel of West Texas Intermediate, the North American oil benchmark commonly known as WTI, was changing hands as high as $72.83 at one point on Tuesday.

USA crude inventories rose 5.8 million barrels last week, while gasoline stocks increased by 1.9 million barrels, the Energy Information Administration said.

Some of the biggest oil-producing nations should step in to ease any supply shortfall should shipments from Venezuela or Iran collapse, IEA Executive Director Fatih Birol said earlier this week.

Swiss investment bank UBS reportedly warns there could be an oil price spike to $100 that triggers a US recession.

Brent crude oil rose above 80 dollars a barrel on Tuesday, supported by concern that falling Venezuelan crude output and a potential drop in Iranian exports could further tighten global supply. "U.S. Secretary of State Pompeo demanded that Iran halt all uranium enrichment and give nuclear inspectors access to the entire country", ANZ said in a note.

Oil prices have gained almost 20 percent this year, driven primarily by coordinated supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and partners including Russian Federation.

This comes even as USA crude production has risen.

Crude oil exports fell last week and refinery utilization rose ahead of the Memorial Day weekend. Iran is a member of the Organization of Petroleum Exporting Countries and the decision means as much as 1 million barrels of oil per day could disappear from the global market.

Distillate stockpiles, which include diesel and heating oil, fell by 1 million barrels, versus expectations for a 1.3 million-barrel drop, the EIA data showed.

Global oil prices fell Friday after top producer Saudi Arabia signalled a likely boost in supply as soon as the third quarter, and world stock markets were mixed over the sudden United States move to cancel the summit with North Korea.

The API reported a build in gasoline inventories for week ending May 18 in the amount of 980,000 barrels-in contrast to the 1.388-million-barrel draw that analysts had expected.

OPEC and some non-OPEC major oil producers are scheduled to meet in Vienna on June 22. That was a surprise increase compared with the 2 million-barrel decline predicted in a Bloomberg survey.

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