Geopolitical risk led to an upward revision in the price of crude oil, a revision that came before the U.S. decision to leave the Iranian nuclear deal. Photo by AzmanMD/Shutterstock
May 10 (UPI) -- A forecast for a $7 per barrel increase in the average price for oil this year was made before the U.S. left the Iranian nuclear deal, the government said.
In a daily market brief, the U.S. Energy Information Administration said it expected the price for Brent crude oil will be around $71 per barrel for the year, an increase of $7 per barrel from its April forecast. In April, when EIA was developing its forecasts for this month, geopolitical risk emerged as a factor for a premium on the price of oil.
"These risks, including the re-imposition of oil sanctions against Iran and the upcoming results of May elections in Venezuela, may materialize into actions that remove oil supplies from the global market and, in turn, tighten global oil balances," the EIA's brief read.
EIA stressed that a Tuesday decision from U.S. President Donald Trump to leave the Joint Comprehensive Plan of Action, the Iranian nuclear deal, wasn't considered in its forecast because of the time it takes to review data and make predictions before publishing its results.
EIA will consider the move when preparing its report for June. Apart from Iran, Venezuelan oil production is at historic lows. Both are members of the Organization of Petroleum Exporting Countries, which is working to drain a market surplus with voluntary production cuts.
The U.S. agency said crude oil inventories for the world's advanced economies were 3 percent below the five-year average for its lowest level since March 2014, when Brent was in the $100 per barrel range.
The price for Brent crude oil is up more than 3.5 percent on the week and making a move on $80 per barrel. Brent opened April at $67 per barrel. The monthly average price for Brent has increased in nine of the last 10 months.
Weighing the potential outcome before Trump's announcement on Tuesday, Moody's Analytics energy economist Chris Lafakis said oil-related sanctions on Iran won't bite as hard as in previous years because the United States is taking unilateral action and not coordinating with other parties to the agreement on any additional Iranian pressures.
EIA expects Brent to hold a $5 premium to West Texas Intermediate, the U.S. benchmark for the price of oil. Moody's said it expects WTI to average $68 per barrel during the first quarter, but slip to finish out the year at around $64 per barrel.