Oil rises on Iran sanctions and lower US stockpiles

An oil well pump jack is seen at an oil field supply yard near Denver, Colorado, U.S., February 2, 2015. (Reuters)
Updated 30 August 2018

Oil rises on Iran sanctions and lower US stockpiles

LONDON: Oil prices extended gains yesterday as the market considered the impact of reduced Iranian exports and a fall in
US stockpiles.

Brent crude gained more than 50 cents a barrel at $77.64 by midday in London, taking its weekly gain to almost 10 percent.

US light crude was 40 cents higher at about $69.91.

“The oil market is once again tightening after a short period in late June and early July when it was likely oversupplied,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. “Iranian oil export declines are already visible well in advance of US oil-related sanctions.”

Most of Iran’s customers are already facing difficulties in buying the country’s crude even before sanctions are imposed on Nov. 4, Bloomberg reported on Thursday.

India and China’s combined purchases of Iranian oil could drop about 23 percent to almost 1 million barrels a day amid the US restrictions, ESAI Energy said. 

OPEC is set to discuss the impact of the decline in Iranian crude on global energy markets when it meets in December — more than a month after the oil sanctions come into effect.

“A sudden drop in Iranian crude shipments from the market will cause big shortages and a negative impact on oil prices,” he said, referring to a possible increase in prices,” Alaa Al-Yasiri the head of Iraq’s state-oil marketer SOMO, told Reuters on Wednesday. “It’s very difficult to predict what’s going to happen in next OPEC meeting but producers must find ways to make up for Iranian crude that the market will lose. The major issue during the next OPEC meeting will be are producers really ready to pump more oil to compensate Iran’s share?”

Ongoing concerns over supplies from Venezuela as well as declining US oil inventories have stengthened claims that the global oil market is tightening once again.

US commercial crude inventories fell by 2.6 million barrels in the week to Aug. 24, to 405.79 million barrels, the Energy Information Administration said on Wednesday. That was more than forecast.

Still, current US sanctions on Iran are unlikely to stop Iranian oil exports completely, a long-time adviser at Saudi Arabia’s Energy Ministry said on Tuesday, adding Iran would be unable to close the straits of Hormuz and Bab Al-Mandab even partially.

Speaking at an oil conference in the Norwegian city of Stavanger, Ibrahim Al-Muhanna said that Iran would be the first to lose out from any move to block those major shipping routes and that any such action would trigger further sanctions on Iran.

Iran has said if it cannot sell its oil due to US pressure, then no other regional country will be allowed to do so either, threatening to block the Strait of Hormuz.

“The amount of oil going through the Strait of Hormuz is so large. There’s more than 18 million barrels a day, about two-thirds of world maritime oil trade. Meaning, cutting oil from there will lead to an acute oil shortage and prices will skyrocket,” Muhanna said.

Aramco boosts oil export capacity from the west

Updated 17 October 2018

Aramco boosts oil export capacity from the west

  • Move will allow Yanbu to handle extra 3 million barrels daily
  • Exports crude from oilfields in the east of the Kingdom

LONDON: Saudi Aramco has completed a major upgrade of its port at Yanbu that will allow it to handle an extra 3 million barrels per day of crude oil.
It comes amid a global supply crunch that has led to calls for increased output from Middle East oil exporters such as Saudi Arabia.
The terminal, which is located south of Yanbu on the west coast, consists of a tank farm and offshore facilities to receive, store and load Arabian Light and Arabian Super Light Crude.
“The successful startup of the Yanbu South Terminal is another milestone in reinforcing Saudi Aramco’s goal to be the world’s leading integrated energy and chemicals producer,” said Abdullah Al-Mansour, executive head of pipelines, distribution and terminals at Saudi Aramco.
Yanbu is one of Saudi Arabia’s key petroleum shipping terminals and the country’s second port after Jeddah, located about 300 kilometers to the south. Crude flows from oilfields in the east of the country through pipelines that terminate in Yanbu, before being loaded onto supertankers and being transported around the world.
OPEC Secretary-General Mohammad Barkindo on Tuesday urged oil companies to increase capacity and boost investment as spare oil capacity shrinks worldwide.
The global oil sector needs about $11 trillion in investment to meet future oil needs in the period up to 2040, Barkindo said.
Earlier this week Saudi Energy Minister Khalid Al-Falih said that the Kingdom was the world’s energy “shock absorber” and pledged to continue to offer a cushion to global supply interruptions.
His remarks coincided with mounting concerns among energy-importing nations about the recent rise in the oil price and increased pressure from the US for the Kingdom to boost production.
“We could have another unanticipated, unplanned disruption. We’ve seen Libya, we’ve seen Nigeria, we’ve seen Venezuela and we have sanctions on Iran. These supply disruptions need a shock absorber,” Al-Falih told the CERAWeek event by IHS Markit.
“The shock absorber has been, to a large part, Saudi Arabia. We have invested tens of billions of dollars to build the spare capacity which has been two to three million barrels over the years.”