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
0

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.


Oil extends 7% slump from previous day

Updated 14 November 2018
0

Oil extends 7% slump from previous day

  • Oil markets are being pressured from two sides: a surge in supply and increasing concerns about an economic slowdown
  • OPEC has been making increasingly frequent public statements that it would start withholding crude in 2019

SINGAPORE: Oil markets slipped again on Wednesday, extending losses from a 7 percent plunge the previous session as surging supply and the specter of faltering demand scared off investors.
US West Texas Intermediate (WTI) crude oil futures were at $55.50 per barrel at 0514 GMT, down 19 cents from their last settlement.
International benchmark Brent crude oil futures were down 22 cents at $65.25 per barrel.
Crude oil has lost over a quarter of its value since early October in what has become one of the biggest declines since prices collapsed in 2014.
The slump in spot prices has turned the entire forward curve for crude oil upside down.
Spot prices in September were significantly higher than those for later delivery, a structure known as backwardation that implies a tight market as it is unattractive to put oil into storage.
By mid-November, the curve had flipped into contango, when crude prices for immediate delivery are cheaper than those for later dispatch. That implies an oversupplied market as it makes it attractive to store oil for later sale.
Oil markets are being pressured from two sides: a surge in supply and increasing concerns about an economic slowdown.
US crude oil output from its seven major shale basins is expected to hit a record of 7.94 million barrels per day (bpd) in December, the US Department of Energy’s Energy Information Administration (EIA) said on Tuesday.
That surge in onshore output has helped overall US crude production hit a record 11.6 million bpd, making the United States the world’s biggest oil producer ahead of Russia and Saudi Arabia.
Most analysts expect US output to climb above 12 million bpd within the first half of 2019.
“This will, in our view, cap any upside above $85 per barrel (for oil prices),” said Jon Andersson, head of commodities at Vontobel Asset Management.
The surge in US production is contributing to rising stockpiles.
US crude stocks climbed by 7.8 million barrels in the week ending Nov. 2 to 432 million as refineries cut output, data from industry group the American Petroleum Institute showed on Tuesday.
The producer group Organization of the Petroleum Exporting Countries (OPEC) has been watching the jump in supply and price slump with concern.
OPEC has been making increasingly frequent public statements that it would start withholding crude in 2019 to tighten supply and prop up prices.
“OPEC and Russia are under pressure to reduce current production levels, which is a decision that we expect to be taken at the next OPEC meeting on Dec. 6,” said Andersson.
That puts OPEC on a collision course with US President Donald Trump, who publicly supports low oil prices and who has called on OPEC not to cut production.