Oil prices rise on Iran sanctions, outlook uncertain

Marco Green
October 7, 2018

US exports to all Asian countries fell 73,000 bpd to 427,000 bpd last week, while USA shipments to Europe dropped 102,000 bpd to 543,000 bpd, Kpler data showed.

On the other hand, according to the report, it will not be possible for the Organization of Petroleum Exporting Countries (OPEC) to compensate for the supply gap that will occur after the sanctions are levied against Iran.

Reuters reported on Wednesday that Russian Federation and Saudi Arabia struck a private deal in September to raise output.

Crude futures steadied on Friday after climbing to four-year highs earlier this week, and both Brent and USA crude marked weekly gains ahead of us sanctions on Iranian oil exports. Prices had tumbled in earlier trading after the Energy Information Administration reported an eight-million-barrel rise in United States stockpiles last week.

US West Texas Intermediate (WTI) crude futures were up 43c or 0.6% at $74.76 a barrel. The banks sees Brent crude averaging just $77 per barrel in the fourth quarter, down significantly from the price today. Analysts doubt if Saudi Arabia can produce much above current near-record levels.

The kingdom plans to invest $20 billion to maintain and possibly expand its spare oil production capacity, and now has a maximum sustainable capacity of 12 million bpd.

Prices have already risen to a level that has contributed to a slowdown in economic growth and oil consumption in the past. First, demand will "soften" at a time when supply should continue to rise.

The US administration - and in particular his son-in-law Jared Kushner - has sought a close relationship with King Salman's son Mohammed bin Salman, the country's crown price and next in line to the throne in the Al Saud monarchy.

Front-month futures have also hit 9,800 yen per barrel, the same as in October 2007, on their way to a peak of 15,300 yen in July 2008 (reut.rs/2yhI5fu).

"Notwithstanding all the pressures that the Americans are creating on the oil issue, Iran has its own oil customers, and the work is going on in a way that no problems will arise", he said.

Saudi Arabia, Opec's largest producer, is now pumping about 10.7 million barrels per day, Falih told reporters in Moscow, just shy of the record set in November 2016.

"One of the things I think that's important, whether it's for Iraq or India or anyone else - particularly that's been a purchaser of Iranian oil - we've gone to really extra lengths to try and find substitute sellers of oil so that there would be alternative supplies at market rates", Bolton said.

Other reports by Click Lancashire

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