Global oil prices recoiled from the $US80 a barrel level hit on Thursday, but still ended the week with a solid rise.
In Europe July Brent crude futures lost 79 cents, or 1%, to settle at $US78.51 a barrel on Friday after topping $US80 in intraday trading on Thursday for the first time since November 2014.
Friday’s close saw it up 1.8% for the week meaning Brent has now risen for six weeks in a row, the longest such run since March 2011. In New York on June West Texas Intermediate (WTI) crude fell 21 cents, or 0.3%, to end at $US71.28 a barrel, after settling at a 3½-year high over the past two sessions.
Prices rose 0.8% for the week—a third straight weekly rise and the Brent premium over WTI crude is now more than $US7 a barrel, reflecting the growing oversupply in some parts of the US (on the Gulf Coast and around parts of Texas for example where there is a further discount to the WTI price which topped $US12 a barrel last week on some occasions).
It was a combination of the sanctions on Iran from President Trump and the continuing collapse in the Venezuelan economy and oil industry (there are elections in the country this week that won’t change a thing).
Those pressures, on top of the 1.8 million barrels a day production cap from Opec and Russia and stronger oil consumption driven by a healthier global economy, have convinced some investors that prices could head even higher.
Some urgers even mention $US100 a barrel (or around the June, 2014 levels when the great slider started.
Data from oil services group Baker Hughes on Friday revealed that the number of rigs drilling for oil in the US was unchanged last week at 844 after rising for the previous six weeks. US production is now up to 10.72 million barrels a day.
US shale producers, meanwhile, have increased investment in production but are facing now facing growing pressures on revenues and from the discounts in and around Texas.
Permian Basin oil is selling at the steepest discount to benchmark US prices in 3½ years, after production there surged to a record of around 3.2 million barrels a day.
That discount is not having any impact outside that part of the US.
The AMP’s Chief Economist, Dr Shane Oliver wrote at the weekend that in Australia “rising oil prices (are) flowing through to petrol prices and cutting into spending power.”
“Reflecting strong global demand, falling inventory levels and the threat to the supply of Iranian oil, global oil prices have risen around 45% over the last year and this has driven a sharp rise in Australian petrol prices from around $1.25/litre to around $1.45/litre.
“The lag from higher oil prices to higher petrol prices suggest Australian petrol prices may rise another 3-4 cents/litre in the next week or so."
