Oil prices inch up in face of tight market

Marco Green
July 9, 2018

Meanwhile, the number of working oil platforms in the United States continues to grow, and this is an early indicator of future output.

Global benchmark Brent had climbed 49 cents, or 0.6%, to $77.60 a barrel by 0635 GMT.

American crude shipments to China now stand around 400,000 barrels per day (bpd), worth $1 billion a month at current prices.

Trump's trade war with China - which like the Iran conflict was predicated on the not entirely inaccurate argument that the US was getting the short end of the stick with regards to business relations - is another example in which pundits are predicting rough road ahead, despite compelling arguments from minority voices that the dispute will eventually resolve in the Americans' favour.

Oil prices fell early today along with stock markets.

U.S. West Texas Intermediate and worldwide bench-mark Brent crude oil futures are trading mixed in limited action.

Beijing has threatened a 25 percent tariff on US crude imports, although it has not specified a date.

"If China retaliates with tariffs on USA crude, that could improve South Korea's terms of buying US crude.because the USA would need a market to sell to", said the KEEI's Lee.

On Friday, the U.S. tariffs on $34 billion worth of Chinese goods were implemented.

In China, state media slammed U.S. President Donald Trump's government as a "gang of hoodlums", with officials vowing retaliation.

US oil output is increasing but is unlikely to be able to fill the supply gap if USA sanctions are successful in blocking Iranian exports.

In an early sign of future times, an executive from China's Dongming Petrochemical Group, an independent refiner from Shandong province, said his refinery had already cancelled US crude orders.

He added that his refinery had canceled US crude imports and would switch to Middle East or West African supplies instead.

"Looming U.S. sanctions on Iran, however, are causing serious concerns amongst market players". By some estimates, about 1.7 to 2 million bpd of crude and condensate would be cut out of markets once the sanctions are implemented.

United States investment bank Jefferies said today it expected "a drop in Iranian exports well in excess of 1 million bpd" due to the USA sanctions. Under pressure from Washington, Seoul has halted all orders of Iranian oil, according to sources, even as it braces from spillover effects from the U.S.

"Venezuela...will lose another 400,000 bpd by year-end with production going to below 1 million bpd", FGE said, adding that another 300,000 bpd of Libyan capacity was disrupted.

Although Saudi Arabia and Russian Federation have said they would raise output to make up for disruptions, FGE said "there simply is not enough capacity to make up for Iran's crude losses, plus Venezuela and Libya", and warned of the possibility of oil prices rising to $100 per barrel.

Other reports by Click Lancashire

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