The only country that can produce more at the moment is Saudi Arabia, but with the summer months approaching and new supply agreements being signed with Poland and China, the pressure on Saudi oil fields will be huge. The outcome could see crude oil either extend its current run of gains or trigger a deflation of the risk premium which has built up in recent weeks.
Markets from Argentina to Turkey have been under intense pressure, in part because many of these countries have large amounts of USA dollar debt which gets more expensive to finance as the currency rises.
U.S. oil production continues to surge and with that we are seeing bottlenecks starting to emerge. Under 2016's OPEC agreement, Venezuela agreed to cut its production by 95,000 bpd to 1.972 million bpd. The 2015 accord eased sanctions on OPEC's third-largest member in exchange for curbs on its nuclear program, and renewed American measures may stifle the Middle East nation's crude exports.
US light crude settled up $1.29 at $69.72 a barrel.
USA energy companies added nine oil rigs looking for new production in the week to May 4, bringing the total count to 834, the highest level since March 2015, energy services firm Baker Hughes said last Friday.
U.S. West Texas Intermediate (WTI) crude futures added 3 cents to $68.46 per barrel by 0040 GMT. The WTI discount is a boon for refineries, particularly in Asia, that need the light sweet crude which yields higher priced refined petroleum products. If the U.S. goes it alone as we do not Import Iranian Oilare allies such as Japan and South Korea do and they may switch to other suppliers to comply with the stance of the U.S. On the Natural Gas front the market has been a tough nut to crack.
"Geopolitical noise remains loud and in part pushed oil prices towards $75 per barrel", said Norbert Ruecker, head of commodity and macro strategy at Julius Baer. Unipec executives have said previously that such prices increases were "unreasonable". Throw in a drop in US oil imports and total domestic oil inventories have fallen more than 17 per cent from year-ago levels and are now almost 2.5 per cent below their five-year average. The yield on the 10-year Treasury note held steady at 2.95 percent.
US crude is also finding more buyers in Europe due to the Brent/WTI arbitrage. The calculation that is made in market of raw materials is as follows: Iran now produces 3.8 million of barrels daily, and, if Washington opted for hard hand, it will stop exporting equivalent to between half a million and one million barrels per day. One source, according to a report in Hellenic Shipping News, said that of the 25 million barrels expected to land in May, 15 million barrels had already been placed with end-users.