Published: Mon, September 17, 2018
Money | By Arnold Ball

Oil set for weekly gain as supply risk weighed against trade war

Oil set for weekly gain as supply risk weighed against trade war

In its latest monthly oil report, the IEA warned that the oil market is entering a "very crucial period", highlighting continued output decline in Venezuela, this week's attack on the headquarters of Libya's NOC and a sharp reduction in Iranian output ahead of the reinstatement of USA sanctions on November 4.

Oil processors in South Korea, Iran's top customer for South Pars condensate, halted Iranian oil liftings in July as banks, insurance and shipping companies wound down business related to Iran before USA sanctions the country's petroleum sector kick in on November 4.

The energy information administration and the International Energy Agency, a global group of oil-consuming nations, had predicted that the US would eventually pass Russian Federation and Saudi Arabia but possibly not until 2019.

Asian consumers of oil have begun to reduce purchases of Iranian oil and South Korea has reduced its imports Iranian crude to zero, on direct orders of the White House.

The IEA forecasts non-OPEC production to grow by 2 million bpd in 2018 and 1.8 million bpd in 2019, characterized by "relentless growth led by record output from the U.S".

Even so, the expected loss of Iranian oil, declining supply from another OPEC member Venezuela and other outages are boosting crude prices, which this week hit $80 a barrel, the highest since May. There are now eight tankers holding 14 million barrels of Iranian crude or condensate, a form of light crude extracted from gas fields, anchored in the Persian Gulf.

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Washington reimposed some of the financial sanctions from August 6, while those affecting Iran's petroleum sector will come into force from November 4.

The figures show Libya was the highest contributor, increasing its production by 270,000 barrels per day while the total OPEC production increased by 230,000 barrels per day. Saudi Arabia's oil production could rise to the level of 11 million barrels per day if the demand sustains.

Top refiner Indian Oil Corp wants to lift 6 million barrels each in September and October, while Mangalore Refinery and Petrochemicals would load 3 million barrels each for those two months, the sources said.

After the June meetings between OPEC and its friends there was a flurry of talk about restarting production at the fields in the Neutral Zone, shared between Saudi Arabia and Kuwait, but there has been little activity on the ground.

Iran's oil exports started to drop noticeably in August, and many analysts now expect the sanctions to remove more than 1 million bpd of Iranian oil from the market.

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