LONDON, May 16 (Reuters) - Oil fell on Wednesday ahead of an anticipated rise in USA crude inventory that could provide more evidence that demand may be slowing in spite of ongoing crude output cuts by producer group OPEC and imminent US sanctions against Iran.
On the New York Mercantile Exchange, June West Texas Intermediate crude added 35 cents, or 0.5%, to settle at $71.31 a barrel.
"The potential double supply shortfall represented by Iran and Venezuela could present a major challenge for producers to fend off sharp price rises and fill the gap, not just in terms of the number of barrels but also in terms of oil quality", the IEA wrote in its report. There is no apparent resistance so if this rally were to come to a screeching halt, it would likely form a closing price reversal top, which would be a strong sign that the selling is greater than the buying at current price levels.
China, the world's top crude oil buyer, imported around 655,000 barrels a day on average from Iran in the first quarter of this year, according to official Chinese customs data - equivalent to more than a quarter of Iran's total exports.
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Besides lowering its demand outlook, stronger prices also prompted the IEA to increase estimates for supply from Opec's rivals, particularly the US.
The general public has starting feeling the pinch in their wallet as the oil prices have now climbed to five-years high and are unlikely to go down anytime soon. At what point does the price of oil cut demand.? As the dollar strengthens, investors can retreat from dollar-denominated commodities like oil. World supply, meanwhile, rose 1.78 million bpd in April from a year earlier, driven predominantly by non-Opec production.
Crude inventories fell by 1.4 million barrels (MMBbl) in the week ended May 11, compared with analysts' expectations for a decrease of 763,000 Bbls. Growth in non-OPEC production offset production declines from OPEC members.
The IEA noted that Iranian oil exports now total about 2.4 million barrels a day. Non-OPEC output will grow by 1.87 mb/d in 2018, a slightly higher rate than seen in last month's Report.
This morning's EIA inventories report came in at -1.404 million barrels, above projections of -0.763 million.
This was the case with Drill, Baby, Drill the slogan, which proved to be popular and gained further prominence after it was used by Republican Vice Presidential nominee Sarah Palin in her debate with Joe Biden in the 2008 US Presidential elections.