U.S. Crude Threatens Oil Prices Recent Rally Above $70

After oil prices rallied to its highest level since November 2014 last week above $70 per barrel, the markets are now cautious on the next movement of the commodity due to the continuous impact of the growing crude oil supplies in the United States which has weighed in on the efforts of the Organization of Petroleum Exporting Countries to prevent a global oversupply as well as stabilize oil prices.

Crude Weekly Movement

Due to the initial threat from U.S. President Donald Trump of withdrawing from a nuclear deal with Iran which would bring back heavy sanctions to the country affecting its crude production, oil prices rallied to new highs over the past week to as much as $70.42 per barrel while brent crude oil futures traded by as much as $75 per barrel.

Prices of crude oil have traded close to a three year high since the end of March where earlier reports of Trump withdrawing from the deal was made. Middle East tensions have also supported the rally in oil prices due to the possibility of the production in the Middle East being affected by the ongoing tensions.

Oil prices have then gained on the previous weeks due to the same sentiments which supported the OPEC efforts in the middle of a growing production in the United States. Oil prices rallied further when Trump made the official announcement on Monday pushing oil prices to further above $70 per barrel to around $75.57 per barrel while crude oil futures in Asia traded by as much as $73.54 per barrel.

Potential Sanctions Opposition

In Asia, oil prices retreated from a three and a half year high slightly on Monday due to threats of the continuously rising drilling activity in the United States. Crude oil WTI futures for June delivery was down by 0.33% to $70.47 per barrel while Brent crude futures for July delivery were down to $76.77 per barrel which is 0.45% lower from the previous trading session.

In the week that ended in May 11, reports have revealed that an additional 10 oil rigs was added by U.S. drillers totaling to 844 which is the highest since March 2015. The United States previously surpassed the Saudi Arabia as the second biggest producer in the world. The recent rise in their production has led to analysts expecting the country to overtake Russia and become the biggest producer in the world by next year. However, the negative effect of Trump pulling out of the deal on Iran’s oil production may cut around 1 million barrels per day from the global oil production and supply which may delay the United States becoming the biggest producer globally.

See Also: Tension Between U.S. and Iran Pushes Crude Oil Futures Higher

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