Oil prices falling: Europe and Asia resisting U.S. sanctions on Iran

Oil prices falling: Europe and Asia resisting U.S. sanctions on Iran

In its latest monthly report, OPEC says its production rose by 12K bbl/day to 31.9M bbl/day and raises its global oil demand forecast for 2018 by 25K bbl/day, to increase by 1.65M bbl/day Y/Y and average 98.85M bbl/day, according to the cartel's latest monthly report.

Both oil futures contracts hit their highest since November 2014 last week at $78 and $71.89 a barrel respectively as markets anticipated a sharp fall in Iranian crude supply once USA sanctions bite later this year. Oil reached $78.28 a barrel on Monday, the highest since November 2014, after the OPEC report was published.

Indeed, the report showed OPEC for now is cutting more supply than the group has pledged under the pact. Tight and shale formations are expected to average 5.76 million barrels a day, accounting for 94% of total USA petroleum supply in 2018, according to OPEC.

As well as Opec's voluntary cuts, a plunge in Venezuelan oil output due to economic crisis and the United States' departure from a nuclear deal with Opec member Iran have supported prices.

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The surge in oil prices comes at a time of tight supply amid record Asian demand and voluntary output restraint by the Organization of the Petroleum Exporting Countries and non-OPEC producers including Russian Federation. OPEC expects non-OPEC supply to expand by 1.72 million bpd this year, which is higher than the growth in global demand.

"NGLs and non-conventional oil, while estimates for OPEC crude production are based on secondary sources", said the cartel.

The move is set to reimpose USA economic sanctions on Iran, hindering the oil output of the Islamic Republic-a major OPEC member-and reducing global supply.

The higher crude prices that have followed have prompted growth in rival supply and a flood of US shale output. Saudi Arabia said last week it was ready to offset any shortage but would not act alone.

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