Oil up over 2% on concerns over Iran, slower U.S. output growth

Marco Green
September 14, 2018

Oil prices rose on Tuesday as U.S. sanctions squeezed Iranian crude exports.

Brent rose above $80 per barrel on Wednesday for the first time since May, spurred by expectations that USA sanctions against Iran's oil exports, which will start in November, will tighten global markets. "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. Yesterday's close above the key resistance line paves the way for a test of the $80 barrel mark, before a retest of the YTD high.

"Market participants are now evaluating this development in conjunction with potential for further declines in oil output from Iran and Venezuela, which portrays a significantly bullish picture on prices", said Abhishek Kumar, senior energy analyst at Interfax Energy in London.

"South Korea bought 194,000 bpd from Iran in July", OilPrice said. "This is a huge uncertainty on the market - how countries, which buy nearly 2 million barrels per day of Iranian oil, will act". Eyes will be on Iranian oil import data from China and India who typically import around 500-700k barrels.

"Things are tightening up", the agency said in its monthly report, but added: "As we move into 2019, a possible risk to our forecast lies in some key emerging economies, partly due to currency depreciations versus the United States dollar raising the cost of imported energy".

Benchmark Brent crude oil was up 50 cents at $77.87 a barrel by 0750 GMT.

Global oil output hit a record last month, and the IEA sees continued increases in oil production.

The Organization of the Petroleum Exporting Countries (OPEC) on Wednesday reduced its forecast for 2019 global oil demand growth, pointing to economic risks.

Tighter Supply Despite this, the short-term outlook for oil markets is for tighter supply.

In 2018, demand for OPEC crude is expected at 32.91 million bpd, with demand for the second half to average 33.50 million bpd, the monthly market report showed.

"Saudi Arabia, OPEC's largest producer, saw its output rise modestly to 10.40 million bpd, up 38,000 bpd from the previous month, according to secondary sources, S&P Platts reported".

That month Russian Federation produced 11.247 million bpd, a post-Soviet Union record-high.

But it said rising demand could also be checked.

WTI was pushed over $70 during the previous session due to falling crude inventory and production levels.

Other reports by Click Lancashire

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