Oil mixed as Iran sanctions seen tightening market, trade spat weighs on trade

FILE PHOTO A worker inspects a pump jack at an oil field in Tacheng, Xinjiang Uighur Autonomous Region, China June 27, 2018. (Reuters)
Updated 10 August 2018
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Oil mixed as Iran sanctions seen tightening market, trade spat weighs on trade

  • Front-month Brent crude oil futures were at $72.12 per barrel at 0246 GMT, up 5 cents from their last close
  • Despite the possibility of a slowdown in economic growth due to escalating trade tensions, oil markets are for now relatively tight

SINGAPORE: Oil markets on Friday were torn between concerns that the US-China trade dispute would stall economic growth, while Washington’s sanctions against Iran were expected to tighten supplies.
Front-month Brent crude oil futures were at $72.12 per barrel at 0246 GMT, up 5 cents from their last close.
US West Texas Intermediate (WTI) crude futures were flat at $66.81 a barrel.
Despite the possibility of a slowdown in economic growth due to escalating trade tensions, oil markets are for now relatively tight, analysts said, mostly because of sanctions on Iranian oil exports the United States plan to implement in November.
Although many other powers, including the European Union and major Asian buyers such as China and India oppose sanctions, many are expected to bow to American pressure.
“Iranian exports are set for a ‘cliff edge exit’ from the market in Q4 2018,” BMI Research said in a note.
“We do not believe that sanctions have been fully priced into Brent, leaving room for a significant run up in prices toward the end of the year,” it added.
Analysts expect the drop-off in Iranian crude exports to range between 500,000 barrels per day and 1.3 million bpd.
The reduction will largely depend on whether major buyers of Iranian oil in Asia, including India, South Korea and Japan, receive sanctions waivers that would still allow some imports.
It is also not clear whether China, the biggest buyer of Iranian crude, will bow to Washington’s pressure.

Trade dispute

Friday’s markets acted cautiously amid heightened trade tensions between Washington and Beijing.
“The market seems to be focused on fears of reduced demand from China, partially due to the effects of the trade wars between China and the United States,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.
In the latest round, China said it would impose additional tariffs of 25 percent on $16 billion worth of US imports, which would include refined products, autos and medical equipment.
Crucially to oil markets, however, crude has been dropped off the list.
Kenneth Medlock of the Baker Institute for Public Policy said Beijing’s decision reflected China’s reliance on imports.
“The issue for the Chinese is that any tariff on US exports (including) oil will likely hurt their economy disproportionately because they have to import,” he said, noting that “US exports will find a home regardless of how the global supply deck is reshuffled.”
US crude exports to China, seen as a tool to reduce America’s trade deficit with Asia’s biggest economy, have soared in the last two years and by the middle of this year were worth around $1 billion per month.


Norway oil firms lower 2019 investment forecast

Updated 21 February 2019
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Norway oil firms lower 2019 investment forecast

  • Investment forecasts for 2019 lowered to $20.06 billion
  • Several plans for development and operation (PDOs) expected to be submitted

OSLO: Oil and gas companies operating in Norway have lowered their investment forecasts for 2019 to 172.7 billion crowns ($20.06 billion) from 175.3 billion crowns seen in November, a survey by the country’s statistics agency (SSB) showed on Thursday.
In 2020, investments are expected to fall to 158.5 billion crowns according to initial forecasts, but the forecasts could be revised upwards in the months to come, it added.
“Several plans for development and operation (PDOs) are expected to be submitted to the government in both 2019 and 2020,” the agency said in a statement.
“If the schedules for these plans are realized, the accumulated investment costs in 2020 from these projects will increase the investment in field development compared to the present estimate.”
Norway’s oil and gas investments have rebounded from a sharp fall as rising crude prices and cost cuts lift industry activity. It was SSB’s fourth release of companies’ forecasts for 2019 and the first for 2020.
Equinor is Norway’s largest oil firm.