Published: Fri, August 10, 2018
Money | By Arnold Ball

Easing of oil supply fears 'may be short-lived': IEA

Easing of oil supply fears 'may be short-lived': IEA

Oil prices had been edging higher prior to the announcement.

U.S. West Texas Intermediate (WTI) crude futures were up 30 cents, or 0.4 percent, at $69.31 barrel.

That's all occurring as global oil investors are grappling with doubts over how demand will be affected by flaring trade tensions between the USA and China, the prospect of lower exports from Iran due to American sanctions, uncertainty about Saudi Arabia's output strategy and a fall in stockpiles at the storage hub in Cushing, Oklahoma.

"Weaker Chinese import figures are putting pressure on prices".

The action, followed by another set of sanctions scheduled for November, will bring US sanctions against Iran to the level on par with those prior to a major multilateral nuclear deal reached in 2015.

"Of course, such decisions being taken by the US side are absolutely unfriendly and can hardly be associated with the. constructive atmosphere achieved at the latest meeting of the two presidents", he was quoted by Russian news agency Tass as saying. The trading price ranged between US$76.11 per barrel, and US$69.71 per barrel. USA light crude CLc1 was 40 cents lower at $66.41 a barrel.

The trade war is rattling global markets. "The reports that Saudi Arabia's production actually dropped in July continue to provide support for the market".

Global oil markets reacted with a price surge following the re-introduction of the first tranche of United States sanctions on Iran that came into force on Tuesday. On the other hand, a reduction in supply as a result of USA sanctions on Iran (which will reduce supply), is providing support on moves lower. Iran's oil exports to India rose by more than 40,000 bpd from June to 706,452 bpd in July.

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Crude oil prices dropped below $68.00/bbl post-EIA.

So-called "snapback" sanctions are due to be reinstated at 12:01 a.m. EDT on Tuesday, according to a U.S. Treasury official.

French bank Societe Generale said there was now a "comfortable supply" in physical crude markets, but noted "Iran sanctions will take another one million bpd off the markets".

The total reduction will depend on whether major buyers of Iranian oil in Asia receive sanctions waivers that would still allow some imports.

China is the biggest and the most valued customer for Iran's oil and imports more than 650,000 barrels of oil per day from Iran.

Oil Minister Dharmendra Pradhan had last month told Parliament that Iran had in April-June overtaken Saudi Arabia to become the second largest supplier of crude oil to Indian public sector firms. That compares to its previous year's spot purchases of 6.6 million barrels from the shale producer.

Distillate stockpiles, which include diesel and heating oil, rose by 1.2 million barrels, versus expectations for a 220,000 barrels increase, the EIA data showed.

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