Tightened U.S inventories cause oil prices to inch up

Amidst reports of U.S oil inventories tightening, the prices inched up on Wednesday, July 4th 2018. A transformer explosion at Syncrude Canada oil sands facility on June 2nd has caused an outage in oil production ever since, and has diminished supplies to the U.S resulting in limited oil inventories with the US. This coupled with the looming U.S sanctions against Iran, have been irking investors as oil prices in the recent past have already been threatening to jump up.

U.S. West Texas Intermediate (WTI) crude futures CLc1 rose 46 cents, or 0.6 percent, to $74.60 a barrel at 0343 GMT (11.43 p.m. ET), compared with their last settlement. On Tuesday, WTI hit its highest since November 2014 at $75.27.

Brent crude futures LCOc1 were changing hands at $78.10 per barrel, up 34 cents, or 0.4 percent, from their last close.

According to the American Petroleum Institute (API), U.S. crude inventories dropped by 4.5 million barrels to 416.9 million barrels in the week to June 29. Gasoline and distillate stocks, which include diesel and heating oil, also fell. This was mainly due to the outage at Syncrude Canada, which usually supplies oil to the U.S. the outage is expected to last through July.

Despite OPEC’s decision to increase oil supplies, warnings from U.S to its allies to sanction against any country maintaining business relationships with Iran from November onward has caused a stir in the oil market which is already short on supplies amidst Syncrude incident and Libyan supply shortage.

In order to compensate for the potential lack of supply, Organization of Petroleum Exporting Countries (OPEC) along with Russia and other oil producing, non- OPEC countries has agreed to increase oil supply from July.

However, OPEC member Iran has issued a warning saying that it is unfair for other oil producing countries to reap benefits by taking its market shares. Iran’s President Hassan Rouhani on Tuesday said it was “unwise to imagine that someday all producer countries will be able to export their surplus oil and Iran will not be able to export its oil.”