Oil prices rose Friday morning on growing signs of a global supply deficit, with crude holding on to four-year highs.
November West Texas Intermediate crude CLX8, +0.01% ticked 2 cents, or less than 0.1%, higher to $72.14 a barrel on the New York Mercantile Exchange, after rising 0.5% on Thursday.
Global benchmark November Brent LCOX8, +0.51% picked up 23 cents, or 0.3%, to $81.61 a barrel on the ICE Futures Europe exchange, following an advance of 0.5% in the prior session. The November Brent contract expires at Friday’s settlement.
For the week, Brent crude is set to rise 3.6%. It’s on track for a monthly gain of 5.4% and a quarterly advance of 4.8%. U.S. oil is set for a weekly gain of 1.9%, a monthly rise of 3.3% but a decline for the quarter of 1.8%, according to FactSet data.
Overall, the market has been bolstered by declining Iranian crude exports ahead of U.S. economic sanctions against the Islamic Republic’s oil industry, set to take effect Nov. 4, analysts say.
“Iranian oil exports are falling faster than expected,” said Giovanni Staunovo, commodity analyst at UBS Wealth Management.
Officials at the state-run National Iranian Oil Co. have said they provisionally expect crude shipments to have dropped to about 1.5 million barrels a day this month, compared with 2.3 million barrels a day in June, according to people familiar with the matter.
President Donald Trump in May pulled the U.S. out of a 2015 international agreement to curb Iran’s nuclear program, setting the stage for the reimposition of economic sanctions.
At the same time, the oil market has been bolstered because the U.S. “is not planning to tap its strategic oil reserves and Saudi Arabia is taking a rather passive approach” to filling the gap left by the Iranian shortfall, Staunovo explained.
The Organization of the Petroleum Exporting Countries—de facto under Saudi Arabia’s leadership—and its production allies, including Russia, agreed at a meeting in Algiers on Sunday to adhere to current production quotas first implemented at the start of 2017. That means continuing a gradual ramp up in production the producers had agreed to at the start of the summer in an effort to bring down overcompliance with the initial agreement.
But the producers declined to announce specific plans to raise production further, as many market participants had anticipated, seemingly defying calls by President Donald Trump for the cartel to increase output to put a cap on prices—sending the cost of a barrel soaring Monday, comfortably above the symbolic $80 threshold.
Now, the “ascent in oil prices shows few signs of capitulating,” said Stephen Brennock, analyst at brokerage PVM Oil Associates Ltd.
Oil market participants are looking ahead to data from the U.S. Energy Information Administration on Friday on U.S. production for July, as well as weekly data from Baker Hughes on the number of rigs drilling for oil in the U. S.—a key barometer of activity in the sector, which is due at 1 p.m. Eastern Time.
