Oil climbs on Middle East unrest, with Brent notching another multiyear high

Oil climbs on Middle East unrest, with Brent notching another multiyear high

West Texas Intermediate crude rose 26 cents to settle at $70.96.WTI´s discount to Brent was as much as $7.28, its widest since December 12 on surging US output.

Stronger oil prices are also spilling into other markets.

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

The difference between the two benchmarks briefly widened to more than $8 a barrel, the widest gap since April 2015, reflecting surging US crude supplies and a greater geopolitical risk to Brent-based crudes. An exected drawdown is USA stockpiles could see WTI break higher once more.

OPEC's success with the oil production cutting deal has been to a significant extent aided by Venezuela's catastrophically dropping production as the country grapples with foreign exchange shortage, US sanctions, and a devastating economic crisis. "The API inventory data in the USA fits with. a topping pattern or at least a decent pause for oil prices at the moment", said Greg McKenna, chief market strategist at futures brokerage AxiTrader. "Coupled with no signs of new supply coming on, demand remaining strong as well as the geopolitical turmoil in Iran and you have the conditions for this push up towards $80" a barrel.

"The potential double supply shortfall represented by Iran and Venezuela could present a major challenge for producers to fend off sharp price rises and fill the gap, not just in terms of the number of barrels but also in terms of oil quality", it said.

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A lower USA benchmark price could make American crudes attractive in Asia.

USA shale oil production, meanwhile, is forecast to continue its climb.

In 2017, China surpassed the United States to become the world's top crude oil importer as its domestic production declined while it kept the title of world's largest oil consumer for the ninth consecutive year, and while it expanded refining capacity, and reduced restrictions on oil imports and refined oil product exports.

More figures on US oil output will be released separately by the EIA and International Energy Agency on Wednesday. The U.S. crude contract fell as much as 0.6 percent to $70.95 a barrel on Wednesday.

June natural gas settled down by 0.2% at $2.836 per British thermal units.

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