Venezuelan, Iran sanctions, OPEC and US policies led to gain in Crude

Global growth and excess supply kept crude at a low but the futures retained strength on April 17, 2019 trading session over the surprise draw in the US crude stocks and strong Chinese GDP growth.  

Many geopolitical factors like sanctions on Venezuela has been keeping the prices low, while, the release of Chinese GDP shows 6.4 percent growth in Q4 improved the overall situation.  

In the week ending April 12, the US crude stockpiles fell 3.1 million, and the OPEC supply cuts and sanctions on Iran and Venezuela continued to create pressure.  

The potential slowdown in production where US sanctions have been imposed like the Venezuelan state-owned firm PDVSA is expected to operate below capacity in the month of April because the crude upgrades are jointly owned by foreign companies. 

Analysts believe the price may increase over global growth improving Chinese economic data and risk sentiments. There are other possibilities where Russia could end the OPEC deal and cap further gains; moreover, the gains were supported by the unexpected drop in stockpiles in the April 12 week. 

Demand Grows 

Despite worries over the slowing economic condition, energy expenditure in the US continues to grow with the highest demands in the industrial sector, in petrochemical, manufacturing, and refining sectors.  

China is one of the biggest consumers and the US president said they are very close to making a deal. The other nonrenewable energy source like coal has fallen sharply, in terms of,  dependency on natural gas increased by 4 Quads or 10.7 percent in the US, which is now one of the biggest consumer fossils.  

In the first week of April, the prices gained to five months high overbullish employment data in the country and escalating conflicts in Libya. In March, sanctions led to a decline in supplies where the output of Venezuela crude declined to an all-time low of 870,000 barrels per day. 

The blackout in the country is a challenge where the economic collapse, mismanagement, corruption, and sanctions have created concerns. The current output has brought the country’s output at 600,000 bpd less than the last year. 

The OPEC countries had decided to decline production by 1.2 million BPD at the start of the year for six months to regulate prices, and the OPEC nations, Russia, and other members are expected to meet again in June last week to extend the pact.  The curbs led to a decline in production in the month of March by 550,000 BPD. 

Iran’s Decline in Yield

Iran faces similar situations where the oil exports dropped in the month of April to one of the lowest in the year as per the tanker data and industry data, which suggested the buyers were restricting purchases due to restrictions imposed by Washington, which was reimposed in Novembers over the nuclear issue. 

This led to increasing supply losses and an increase in price to $70 a barrel. Earlier the US granted sanction waivers to some countries to prevent excess gains in rates, while, the exemptions will expire in May.