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Oil Prices Continue Rally on OPEC, US Sanctions, and EIA Report

June 29, 2018 at 12:56 by Matt Jackson

Oil prices have continued their rally on Friday, with Brent making the bigger gains of the 2 major benchmarks. The commodity is set to make strong weekly, monthly, quarterly, and 6-monthly gains at the end of this week. The increase has come following last week’s disappointing OPEC announcement that they would only increase supply to the level that they previously agreed, on renewed US threats against countries that continue to buy oil from Iran, and as the EIA reported the biggest decline in US oil supplies this year.

Last week, OPEC nations discussed the possibility of increasing oil supply in order to meet the shortfall that will occur after sanctions against Iran and Venezuela. There had been some dispute between two factions within the cartel. On the one hand, Saudi Arabia and Russia looked willing to offer a decent increase in supply levels. However, Iran, Iraq, and Venezuela, had voiced their opposition to the idea. In the end, the oil producing nations agreed to increase supply but said that they would not break the supply restrictions they had agreed to in a 2017 deal and that is set to continue until the end of this year.

Earlier this week, the US reiterated their intention to impose tariffs against countries that continued to buy oil from Iran. The world has been put on notice that any country that buys any oil from Iran after the November 4 deadline will be hit with extra tariffs.

Also this week, the Energy Information Administration reported a decline of 9.9 million barrels of crude supply. This represents the largest weekly decline this year, and was significantly higher than the estimated 2 million barrel decline that analysts had predicted.

Meanwhile, Canada is reducing its own supply levels, although Ethiopia has started producing oil for the first time, and experts have said that the African nation has the potential to produce commercial levels of the commodity, although as testing has only just begun, they are unlikely to hit these levels for some time.

The recent rally means that oil is set to make around 7% gains for the week, 13% gains for the quarter, and could see an increase of 20% for the first half of the year.

Today, WTI crude has seen a marginal gain of 0.15%, reaching $73.56 a barrel, while Brent crude has risen 1.21% to reach $78.55 at 13:45 GMT.

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