Oil pushes past $80 as Iran fears mount

Marco Green
September 12, 2018

"We have told the Indians consistently, as we have told every nation, that on November 4th the sanctions with respect to Iranian crude oil will be enforced, and that we will consider waivers where appropriate, but that it is our expectation that the purchases of Iranian crude oil will go to zero from every country, or sanctions will be imposed", Secretary Pompeo said, noting that many countries would need "a little bit of time to unwind".

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

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

Asked whether higher American oil imports could mean replacing Iranian crude, the official said: "We are dealing with two issues separately and our stand has been communicated to the United States".

"The path of least resistance for oil prices, given the supply fundamentals, remains up", Harry Tchilinguirian, oil strategist at BNP Paribas, told Reuters Global Oil Forum.

Washington is putting pressure on other countries to also cut Iran imports, with close allies like South Korea and Japan, but also India, showing signs of falling in line. But drilling activity in the Permian basin, the largest US oil patch, has begun showing signs of a slowdown due to limited pipeline takeaway capacity. A bigger-than-expected draw could drive prices sharply higher. Perry will meet with Russian Energy Minister Alexander Novak on Thursday in Moscow.

Russian energy minister Alexander Novak on Wednesday said, "This is huge uncertainty on the market - how the countries, which buy nearly 2 million barrels per day of Iranian oil will act".

"This is a huge uncertainty on the market - how countries, which buy nearly 2 million barrels per day of Iranian oil, will act".

Their combined output has risen by 3.8 million bpd since September 2014, more than the peak output Iran has managed over the last three years.

Novak said geopolitical risk and supply disruptions shared the blame for the global oil markets "fragile" condition. Novak did not provide details.

A group of OPEC and non-OPEC producers have been voluntarily withholding supplies since January 2017 to tighten markets, but with crude prices up by more than 40 percent since then and markets significantly tighter, there has been pressure on producers to raise output.

As Middle East markets tighten, Asian buyers are seeking alternative supplies, with South Korean and Japanese imports of US crude hitting a record in September.

Saudi Arabia wants oil to stay between $70 and $80 a barrel for now as the world's biggest crude exporter strikes a balance between maximizing revenue and keeping a lid on prices until US congressional elections in November, OPEC and industry sources have told Reuters. Brent crude, the global benchmark, was up 1% at $79.84 a barrel.

Other reports by Click Lancashire

Discuss This Article

FOLLOW OUR NEWSPAPER