Oil prices climb as Iran sanctions loom

14 September, 2018, 01:53 | Author: Eric Barnett
  • Oil prices climb as Iran sanctions loom

Crude oil prices gained traction on Tuesday and finally staged a decisive recovery with the barrel of West Texas Intermediate breaking above the $69 mark.

The upturn in oil prices come as the United States' sanctions squeezed Iranian crude exports and after the U.S. crude oil production in 2019 was forecast to grow at a slower rate than previously expected, prompting supply concerns.

Oil markets are also watching Hurricane Florence offshore the United States, amid surging demand for gasoline and diesel, although crude output will not be affected on the storm's current route, according to CNBC. "The situation in Venezuela could deteriorate even faster, strife could return to Libya and the 53 days to November 4 will reveal more decisions taken by countries and companies with respect to Iranian oil purchases", the IEA said, referring to the day US sanctions on Iran take effect.

"According to Bloomberg, in case the Iran sanctions come into place, oil price could go up to $150 a barrel", reported ET.

"Oil cut earlier losses and rose towards its highest level this year on Wednesday, after a drop in US crude inventories and as the prospect of the loss of Iranian supply added to concerns over the delicate balance between consumption and production".

Russian Energy Minister Alexander Novak said on Tuesday that Russia and a group of producers around the Middle East which dominate the Organization of the Petroleum Exporting Countries may sign a new long-term cooperation deal at the beginning of December, the TASS news agency reported.

"Iran is increasingly becoming the preoccupation of the crude market".

"South Korea bought 194,000 bpd from Iran in July", OilPrice said.

Traders said this pulled wide open the discount of U.S. WTI crude versus Brent to around $10 per barrel, the biggest since June.

The Paris-based IEA maintained its forecast of strong growth in global oil demand this year of 1.4 million bpd and another 1.5 million bpd in 2019, unchanged from its previous projection.

World oil consumption will top 100 million barrels per day (bpd) in the next three months, putting upward pressure on prices, although emerging market crises and trade disputes could dent this demand, the International Energy Agency said on Thursday.

But it said rising demand could also be checked.

Novak said global oil markets were "fragile" due to geopolitical risks and supply disruptions.

The US crude production is expected to rise 840,000 bpd to 11.5 million bpd next year, lower than a previous expectation for a rise of 1.02 million bpd to 11.7 million bpd, the US Energy Information Administration said in a monthly report.


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