U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading mixed on Thursday, but the latter is clearly the stronger of the two. This is because Poland, Germany and the Czech Republic halted purchases of Russian crude oil due to concerns over poor quality. According to Reuters calculations, about 700,000 bpd of flows is suspended. The pipeline can ship up to 1 million barrels per day.
WTI and Brent crude oil futures remain underpinned by the OPEC-led production cuts and U.S. sanctions against Venezuela and Iran, which continue to tighten supply. Furthermore, the U.S. announced attempts to drive Iranian oil exports down to zero earlier in the week. This news helped spike the markets to multi-month highs earlier in the week.
The rally was dented on Wednesday when the weekly U.S. Energy Information Administration reported that U.S. crude oil production has risen by more than 2 million bpd since early 2018 to a record of 12.2 million bpd currently, making the United States the world’s biggest oil producer ahead of Russia and Saudi Arabia.
Additionally, the EIA said U.S. commercial crude inventories soared to 460.63 million barrels during the week-ending April 20, their highest since October 2017.
Helping to put a lid on prices was a report from the International Energy Agency earlier in the week that said there was plenty of supply available. Furthermore, Brian Hook, U.S. special representative for Iran and senior policy adviser to the secretary of state, said on Thursday “there is plenty of supply in the market to ease that transition and maintain stable prices.” He was speaking about the loss of about 1 million barrels per day due to the enforcement of the U.S. sanctions against Iran.
Furthermore, Consultancy Rystad Energy said Saudi Arabia and its main allies could replace lost Iranian oil.
Traders also remain concerned that Russia may decide to leave the OPEC-led group when they meet in June. They may be planning to try to up production and go after U.S. share in Asia.
Prices are expected to remain firm, but volatility is expected to remain heightened. The spread between Brent and WTI is also expected to remain wide due to the shifting fundamentals which are more supportive for Brent prices.