April 28 is a negative day so far for United States 12 Month Oil (NYSEARCA:USL) as the ETF is active during the day after losing 0.338% to hit $23.795 per share. Aside from these, hedge funds have also reduced their net-long position in WTI. The MSCI global stock index rose for the month of April, its first positive month since January.
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That means underlying demand in the bulk of the USA oil market actually fell in February.
Tuesday evening the American Petroleum Institute (API) reported that crude inventories rose by about 3.4 million barrels in the week ending April 27. However, the commodity recorded a gain of 3.7 percent for the month.
The United States has questioned Iran’s sincerity in implementing the nuclear curbs and President Donald Trump has threatened to reimpose sanctions if adjustments are not made to the agreement.
The May 12th deadline to renew or leave the Iran deal is looming and as of Sunday afternoon, the Trump White House has given no indication which way it is leaning.
“It’s only Trump who wants to back out of the deal, but he wants to back out of so many deals …”
“Less oil from Iran would further tighten supply, so oil prices remain well supported”, said Commerzbank in a note.
OPEC and its allies have succeeded in wiping out an oil glut through production cuts launched in early 2017, boosting prices to a three-year high above $75. This included Syria conflict, tensions between Saudi Arabia and Yemen rebels.
Another risk stems from government finances, especially if the government foregoes a levy imposed on oil when prices were low in previous years.
French President Emmanuel Macron’s prediction that the U.S. will pull out of the nuclear deal has boosted speculation over reduced shipments from Iran. This declined from a peak of 67 percent in 2012, while Russian Federation and Brazil increased their market share of Chinese imports more than any other country, from nine to 14 percent and from two to five percent respectively. That is assuming that posturing by the US, China and others on tariffs does not develop into a full-blown trade war, dragging down economic growth and slashing global demand for oil.
USA producers are being given some incentives in an effort to encourage production even while OPEC and other producers including Russian Federation try to curb supplies and raise prices.
“The market is assuming that oil sanctions will snap back onto Iran”, he said. He pointed out that “There’s a lot of profit in the books here for the non-chemicals”.
U.S. West Texas Intermediate crude futures were up 18 cents at $67.43, off a session high of $67.85. Exports averaged 2.15 million barrels a day last week and have a cumulative daily average for the year of 1.62 million barrels a day, a 115% increase over the year-ago export total. However, prices have increased five percent for April. The global benchmark crude traded at a US$6.43 premium to June WTI. The more-active July contract traded at $73.16. In China, it is a public holiday.
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Futures for September delivery were 0.3 percent lower at 441.2 yuan per barrel on the Shanghai International Energy Exchange.
