While all eyes are riveted on Iran and the Middle East, the pace of Chinese oil demand growth could be the most underappreciated story in oil markets right now, Bloomberg Opinion columnist David Fickling writes. He said that Brent crude oil could rise as high as $85 (£63) per barrel, but predicted that they would not drop below $69.70 (£52). According to Goldman, global oil demand growth in the first quarter of 2018 is likely to have seen the strongest yearly growth since the fourth quarter of 2010.
Stronger oil prices are also spilling into other markets.
So far this year, China has lived up to these expectations.
Danish oil product tanker operator Torm on Tuesday said it has stopped taking new orders in Iran as a outcome of US plans to reimpose sanctions on Tehran.
Oil inventories for countries within the Organisation for Economic Cooperation and Development (OECD), at the end of April, were estimated three per cent lower than the previous five-year average (2013-2017), in terms of days of supply, the largest percentage below the five-year average since March 2014.
The agency estimates that global oil inventories fell an average of almost 0.6 million barrels per day (bpd) in each of the past five quarters (January 2017 through March 2018).
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Analysts project that oil exports from Iran could be reduced by about 0.5 million barrels a day as South Korea and Japan trim their imports, said analysts for J.P. Morgan in a recent report.
World supply, meanwhile, rose 1.78 million bpd in April from a year earlier, driven predominantly by non-OPEC production. Steady refining margins and backlog cargoes to some independent refiners contributed to the record import volumes.
The recent decision by US President Donald Trump to withdraw from the Iran nuclear agreement has raised fears that renewed sanctions by Washington could severely hit production from the Middle East state, which now produces 3.8 million bpd and exported 2.6 million bpd last month - making it Opec's third-largest supplier. Concerns over the impact of United States re-sanctioning on Iran apart from other factors like economic crisis in Venezuela are keeping the oil prices high. While European buyers flag concerns over the financing issues of trade with Iran as a potential stop to buying Iranian crude, China is reassuring Tehran that it will continue to import its oil.
Another possible risk to the global oil supply could come from crisis-hit Venezuela, the IEA said.
"The API inventory data in the US fits with. a topping pattern - or at least a decent pause - for oil prices at the moment", said Greg McKenna, chief market strategist at futures brokerage AxiTrader.