“A reinstatement of U.S. sanctions on Iran likely would dislocate at least 500K barrels of the Iran’s oil exports, resulting in a $5 price increase to oil, the bank says, adding that combined with potential supply disruptions in Iraq, Libya, Nigeria and Venezuela could see global oil supply drop by more than 3M bbl/day this year,” according to Seeking Alpha.
For its part, OPEC remains concerned about the level of production by U.S. shale producers and the cartel is urging its U.S. rivals to pare output to support prices. According to the Energy Information Administration, crude oil product could hit 9.9 million barrels per day in 2018, which surpasses the prior high reached in 1970 of 9.6 million barrels per day.
Current OPEC compliance with production cut plans remains above their historical average, and it usually takes between two to three quarters for inventories to normalize after the cuts. While demand has yet to catch up to elevated supplies, rebounding economies in Europe and steady economic growth in the U.S. could prompt more upside for oil this year.
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