Oil prices have rallied for most of the past two weeks due to a combination of Nigerian, Venezuelan and other outages, declining USA output and virtually frozen inflows of Canadian crude after fires in Alberta’s oil sands region.
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The bank even said that global crude inventories were still edging up despite the supply disruptions, implying that there is still more oil being produced than consumed. Brent for July dipped $1.08 to $47.85 a barrel. While those outages persist, a cash-strapped energy industry, ongoing political crises and a worsening drought threaten to cut a “significant” part of OPEC member Venezuela’s 2.5 million barrels a day production capacity, according to ANZ. The Department of Energy’s statistical arm reported an increase of 1.3 million barrels in crude oil inventories in the country; analysts had estimated a 2.8 million barrels decline.
With falling inventories in the USA, oil prices have climbed to a seven-month high.
Oil prices retreated earlier in the week as the dollar rallied following indications that the U.S. Federal Reserve could launch another round of rate increases at its next meeting in June.
Shortly after 1100 GMT, U.S. benchmark West Texas Intermediate (WTI) for delivery in June was 14 cents higher at US$48.45 a barrel.
Unexpected supply disruptions across the world, excluding output falls in the United States, amount to around 2.5-million barrels of daily production, ANZ bank said. “But with the Fed disputing that, we could have a much stronger dollar from here, which is typically bearish for oil and other commodities”.
“People are looking for any signs possible to confirm that supply is decreasing so any news of unplanned outages gets the market particularly excited”, AFP has quoted BMI Research oil and gas analyst Peter Lee as saying.
However, brimming inventories across the world were preventing supply shortfalls as well as sharper price spikes, traders said.
“We think people really had a June rate hike off the table”, said Tariq Zahir, crude trader and managing partner at Tyche Capital Advisors in NY.
Canadian oil production has also faltered in recent weeks as massive wildfires forced closures of key oil-sands mining sites and the evacuation of thousands of residents and workers.
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The Latin American nation with the world’s largest oil reserves relies on crude shipments for 95 percent of export revenue, and requires a higher price than nearly every other member of the Organization of Petroleum Exporting Countries to balance its budget.
