Markets

US Oil Gets Cheaper Versus Mideast Crude After Iran Sanctions

US Oil Gets Cheaper Versus Mideast Crude After Iran Sanctions

SINGAPORE, May 16 (Reuters) - The volume of US crude oil arriving in Asia is expected to hit a new high in July as Asian refiners sought arbitrage supplies to replace Middle Eastern crude after prices for Gulf grades rose, traders said on Wednesday.

Brent crude futures, the worldwide benchmark for oil prices, were at $78.30 per barrel at 0432 GMT, up 7 cents from their last close and not far off a three-and-a-half year high of $78.53 a barrel reached the previous session.

USA crude futures recently fell 4 cents to $70.92 a barrel on the New York Mercantile Exchange.

The tightening market has all but eliminated a global supply overhang which depressed crude prices between late 2014 and early 2017.

Data from China's refineries showed that in April, these processed some 12.06 million barrels of crude daily, up 12 percent on the year and also the second-highest daily throughput rate on record, Reuters noted.

"The value for Midland is better than Murban for cargoes landing in China", a trader with a Chinese company said, adding that the influx of US oil supplies may put some downward pressure on Middle East crude prices.

Business Post reports that the country's crude oil production stood at 2.022 million barrel per day in March, which is about 277,000 bpd below the 2.3 million bpd benchmark for budget 2018.

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Most analysts surveyed by S&P Global Platts predict the sanctions will remove less than 500,000 b/d of oil supply from the global market by the November enforcement deadline, ranging from 100,000-200,000 b/d at the low end and up to 800,000 b/d at the high end.

During the week from April 28 to May 4, the API reported a draw of 1.85 million barrels of crude oil.

Global benchmark Brent gained US$1.11 to settle at US$78.23 a barrel. While European buyers flag concerns over the financing issues of trade with Iran as a potential stop to buying Iranian crude, China is reassuring Tehran that it will continue to import its oil.

The general public has starting feeling the pinch in their wallet as the oil prices have now climbed to five-years high and are unlikely to go down anytime soon.

"US sanctions on Iran take centre stage in the oil market", said Norbert Ruecker, head of macro and commodity at Julius Baer Group in Zurich.

"Now that the country is making cool money from crude oil, Federal Government should start saving for us not to experience the 2016 economic downturn again".