US crude is trading at a hefty discount to Brent, the worldwide marker, thanks to sharp rises in USA production to 10.7 million bpd, which has left the American domestic oil market well supplied.
However, the tailwinds for crude oil now vastly outnumber the headwinds, so prices will likely continue upwards in the coming days, especially in light of the escalation in Israel following the move of the US embassy from Tel Aviv to Jerusalem that ignited protests in Gaza, prompting an immediate military response from the IDF.
OPEC figures published on Monday showed oil inventories in OECD industrialized nations in March fell to 9 million barrels above the five-year average, from 340 million barrels above the average in January 2017.
The United States has announced it will impose sanctions on Iran over its nuclear program, raising fears that markets will face shortages later this year when trade restrictions take effect.
Source U.S. Energy Information Administration Short Term Energy Outlook May 2018
These risks, including the re-imposition of oil sanctions against Iran, and the upcoming results of May elections in Venezuela, may materialise into actions that remove oil supplies from the global market, and in turn, tighten global oil balances.
Current estimates by investment banks that see lowered Iranian and Venezuelan supply pushing up oil prices also assume that the global-and Chinese in particular-demand growth will continue to be strong.
The pending US sanctions against Iran have also contributed to the price rise.
The key oil demand growth center-China-has just beaten its own imports and refinery runs records, as refined oil product exports jump and domestic crude oil production hits seven-year-lows.
Physical crude markets are sagging under the weight of unsold barrels of oil, while the 50-percent rise in the oil price in the a year ago is encouraging major companies such as ExxonMobil, Royal Dutch Shell, Chevron, BP and Total to increase output.