Warning of $80 oil price as sanctions on Iran bite

Marco Green
September 14, 2018

Oil prices rose more than 2 percent on Tuesday as US sanctions squeezed Iranian crude exports and after USA crude oil production in 2019 was forecast to grow at a slower rate than previously expected, prompting supply concerns.

"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 USA sanctions on Iran take effect.

"The price range for Brent of US$70-US$80 per barrel in place since April could be tested".

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

US crude stocks fell by 8.6 million barrels in the week to September 7 to 395.9 million, the American Petroleum Institute (API) said on Tuesday.

Official U.S. government data is due to be released on Wednesday.

Oil prices eased on Wednesday, having neared its highest level this year after a drop in US crude inventories and the prospect of the loss of Iranian supply added to concerns over the delicate balance between consumption and production.

But the USA government does not want to push up oil prices, which could depress economic activity or even trigger a slowdown in global growth.

U.S. Energy Secretary Rick Perry met Saudi Energy Minister Khalid al-Falih on Monday in Washington, as the Trump administration encourages big oil-producing countries to keep output high.

Oil prices fell on Thursday, slipping back from four-month highs as investors focused on the risk that emerging market crises and trade disputes could dent demand even as supply tightens.

He also warned of the impact of U.S. sanctions against Iran: "This is a huge uncertainty on the market - how countries, which buy nearly 2 million barrels per day of Iranian oil, will act".

US crude inventories fell 5.3 million barrels in the week to September 7 to 396.2 million barrels, the lowest since February 2015 and about 3 per cent below the five-year average for this time of year, the US Energy Information Administration (EIA) said on Wednesday. Novak did not provide details.

"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". In New York last night the price was $78.43, up 1 per cent so far this month.

Should markets overheat and prices spike, however, Novak said Russian Federation could increase its output.

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

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.

Other reports by Click Lancashire

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