Investing.com - The focus in the oil market this week will remain on geopolitical tension in the Middle East after President Donald Trump withdrew the United states from the Iranian nuclear agreement.
Prices rallied sharply last week after Trump walked away from an international nuclear deal with Iran and reimposed “the highest level of economic sanctions” against the country.
Some analysts have said the reinstatement of sanctions could lead to tighter global oil supplies as they make it more difficult for Iran to export oil.
Iran, which is a major Middle East oil producer and member of the Organization of the Petroleum Exporting Countries (OPEC), resumed its role as a major oil exporter in January 2016 when international sanctions against Tehran were lifted in return for curbs on Iran's nuclear program.
Exiting the deal leaves the U.S. at odds with Europe and other parties to the deal, who will try to keep it in place.
It may also increase tensions in the Middle East, especially between Israel and Iran.
New York-traded WTI crude futures ended the week up roughly 1.4%, at $70.70 per barrel, for the fourth positive week in five. The U.S. benchmark touched an intraday high of $71.89 on Thursday, its best level since Nov. 28, 2014.
Meanwhile, London-traded Brent crude futures, the benchmark for oil prices outside the U.S., closed the week at $77.12 a barrel, leaving it up 2.8% for the week. It climbed to a three-and-a-half-year high of $78.00 on Thursday.
Aside from geopolitics, oil traders will also continue to weigh a steady increase in U.S. production levels in the week ahead as the rise in U.S. drilling marked one of the few factors tamping back crude in an otherwise bullish environment.
U.S. drillers added 10 oil rigs in the week to May 11, bringing the total count to 844, the highest number since March 2015, General Electric (NYSE:GE)'s Baker Hughes energy services firm said in its closely followed report on Friday.
That was the sixth consecutive weekly increase in the rig count, underscoring worries about rising U.S. output.
Indeed, domestic oil production - driven by shale extraction - rose to an all-time high of 10.70 million barrels per day (bpd) last week, the Energy Information Administration (EIA) said.
Only Russia currently produces more, at around 11 million bpd.
Fresh weekly data on U.S. commercial crude inventories on Tuesday and Wednesday to gauge the strength of demand in the world’s largest oil consumer and how fast output levels will continue to rise will capture the market's attention.
Market players will also focus on monthly reports from the Organization of Petroleum Exporting Counties and the International Energy Agency on Monday and Wednesday to assess global oil supply and demand levels.
OPEC and 10 producers outside the cartel, including Russia, have been holding back oil output by around 1.8 million bpd since the start of last year to slash global inventories to the five year-average. The arrangement is set to expire at the end of 2018.
OPEC will meet in June to decide whether the production-cut agreement should be adjusted based on market conditions.
Ahead of the coming week, Investing.com has compiled a list of the main events likely to affect the oil market.
The Organization of Petroleum Exporting Counties will publish its monthly assessment of oil markets.
The American Petroleum Institute, an industry group, is to publish its weekly report on U.S. oil supplies.
The International Energy Agency will release its monthly report on global oil supply and demand.
Later in the day, the U.S. Energy Information Administration will release its weekly report on oil and gasoline stockpiles.
The U.S. government will publish a weekly report on natural gas supplies in storage.
Baker Hughes will release weekly data on the U.S. oil rig count.
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