• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 2 hours GREEN NEW DEAL = BLIZZARD OF LIES
  • 4 hours How Far Have We Really Gotten With Alternative Energy
  • 6 hours If hydrogen is the answer, you're asking the wrong question
  • 4 days Oil Stocks, Market Direction, Bitcoin, Minerals, Gold, Silver - Technical Trading <--- Chris Vermeulen & Gareth Soloway weigh in
  • 5 days The European Union is exceptional in its political divide. Examples are apparent in Hungary, Slovakia, Sweden, Netherlands, Belarus, Ireland, etc.
  • 19 hours Biden's $2 trillion Plan for Insfrastructure and Jobs
  • 4 days "What’s In Store For Europe In 2023?" By the CIA (aka RFE/RL as a ruse to deceive readers)
Selling Pressure in Oil Subsides

Selling Pressure in Oil Subsides

While the Red Sea attacks…

Oil Prices Poised to Bounce Back in 2024

Oil Prices Poised to Bounce Back in 2024

Despite current low prices, commodity…

ZeroHedge

ZeroHedge

The leading economics blog online covering financial issues, geopolitics and trading.

More Info

Premium Content

Brent Breaks $80 On Flurry Of Bullish News

Ticker: Two weeks after Saudi Arabia said it was targeting $80/bbl oil, this morning Riyadh got its wishes early when Brent hit the Saudi target, jumping as much as 1% to $80.18, following the latest drop in U.S. crude inventories and as traders continued to fret about the consequences of renewed sanctions on Iran.

This was the highest price since November 2014.

Today's jump followed a reported from Goldman titled simply "The case for commodities strengthens " according to which America’s surging shale output won’t be able to replace the potential drop in Iranian oil shipments after the U.S. reimposed sanctions on OPEC’s third-largest producer.

US shale cannot solve the current oil supply problems. Even if only 200-300 kb/d of Iran exports are at risk by year-end, OPEC is not likely to preempt this loss, only react to it. Further, any response will reduce spare capacity in an increasingly tighter market. The erosion in Venezuelan and Angolan oil output is accelerating at the same time ex-US growth is stalling. Only the US has seen supply surprises, but is facing growing pains with filled pipeline capacity, constraining US growth into 2019.

Goldman also noted that physical markets continued to ignore growth concerns - just yesterday the IEA warned that the surge in prices will kill demand - rising rates and USD.

Only financial markets care, which is why only gold has traded substantially lower with the risk-off sentiment. Growth concerns will likely prove temporary, realized demand remains robust and OPEC has never been able to catch late-cycle demand growth to replenish inventories before a recession occurs. And even if growth were to decelerate further, it would take global GDP growth collapsing to 2.5% yoy to simply balance the oil market! We recommend not 'riding this one out.' Related: IEA: High Oil Prices “Taking A Toll” On Demand

And confirming that Jeff Gundlach was right in December to go long commodities, Goldman's Jeff Currie said that oil is the "Best performing asset class now posts the best ytd returns in a decade. The rally likely has room to run, particularly from a returns perspective. Oil fundamentals are now more bullish as robust demand faces supply disappointments. We are raising our 12m S&P GSCI returns forecast to 8% from 5% yet markets remain complacent. Specs have declined since $73/bbl under the mantra, 'we will ride this one out' -- dangerous words from a risk management perspective."

The paradox, of course, is that rising oil prices crush the benefit to the middle class of Trump's tax cuts; crude has rallied this month to the highest level in more than three years after U.S. President Donald Trump withdrew from a 2015 pact between Iran and world powers that had eased sanctions on the Islamic Republic in exchange for curbs on its nuclear program. As we noted yesterday, while the International Energy Agency said a global glut’s been eliminated thanks to output curbs by OPEC, it warned high prices may hurt consumption and cut forecasts for demand growth.

So far, however, demand appears to be doing fine.

On Wednesday, the EIA reported that U.S. crude inventories fell 1.4 million barrels last week, while domestic production rose to 10.7 million barrels a day. Despite surging American output, which has topped 10 million barrels a day every week since early February, traders continue to push the price of Brent higher, unconcerned about the torrent of shale production this will unleash.

ADVERTISEMENT

By Zerohedge

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment
  • Aghast on May 17 2018 said:
    Not so long ago, Americans were sending our puny paychecks to the Middle East to buy their crude along with many billions of US dollars being delivered to the most unstable regions of the world. And you think $71 is a high oil price? The last time oil price rose to $71 on its way to $140 and we imported 70% of our daily consumption. Times have changed.

    Over the next decade, the free money phony stock market valuation will transfer back to the middle class via higher interest rates and higher oil prices.

    Buckle up.

Leave a comment




EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News