Oil stable as Iran sanctions loom, but trade wars weigh

Oil has been buoyed by tumbling Venezuelan output and declining shipments from Iran ahead of the imposition of US sanctions on Tehran in November. (Reuters)
Updated 31 August 2018
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Oil stable as Iran sanctions loom, but trade wars weigh

NEW YORK: Oil prices slipped on Friday, pressured by renewed concerns that a global trade war could dent energy demand, although impending US sanctions on Iran and falling Venezuelan output limited the decline.
Benchmark Brent crude oil fell 42 cents to $77.35 a barrel by 1:35 p.m. EDT (1735 GMT). US crude slipped 36 cents to $69.89.
For the month, global benchmark Brent was set to jump 4.3 percent and US crude 1.6 percent. Oil has been buoyed by tumbling Venezuelan output and declining shipments from Iran ahead of the imposition of US sanctions on Tehran in November.
On Friday, however, oil “appears to be following equities lower amidst renewed US/Chinese tariff concerns that could easily escalate in slowing global economic growth and, hence, world oil demand,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
The MSCI Emerging Markets index fell for a second day as a report that US President Donald Trump was preparing to step up a trade war with Beijing dampened risk appetite and erased some gains from a rally this week. In the previous session, concerns about Argentina’s currency weakening had weighed on the outlook for emerging markets.
Trump threatened on Thursday to withdraw from the World Trade Organization and impose tariffs on $200 billion of Chinese imports.
The US rig count, an indicator of future production, rose for the first time in 3 weeks, energy services firm Baker Hughes reported.
US crude production in June hit 10.674 million barrels per day, the highest monthly total on record, the Energy Information Administration (EIA) said in a monthly report on Friday.
Crude exports rose nearly 200,000 bpd in the month, hitting a new record of 2.2 million bpd, more than twice the level seen last June, the EIA said in a separate monthly report on Friday.
US crude’s discount to Brent, which has widened by nearly a third in the past month, has encouraged an increase in US exports, Bob Yawger, director of energy futures at Mizuho.
Production from the Organization of the Petroleum Exporting Countries increased by 220,000 bpd in August, according to a Reuters survey.
Oil analysts polled by Reuters cut their price forecasts for 2018 in August, for the first time in almost a year, on growing concerns about global trade. A Reuters survey of 45 economists and analysts forecast Brent would average $72.71 in 2018, 16 cents below the $72.87 projected in July but above the $71.96 average so far this year.
The 2019 price was forecast to average $72.58.


‘Get prices down’ Trump tells OPEC

Updated 20 September 2018
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‘Get prices down’ Trump tells OPEC

  • Trump highlights US security role in region
  • Comments come ahead of oil producers meeting in Algeria

LONDON: US president Donald Trump urged OPEC to lower crude prices on Thursday while reminding Mideast oil exporters of US security support.
He made his remarks on Twitter ahead of a keenly awaited meeting of OPEC countries and its allies in Algiers this weekend as pressure mounts on them to prevent a spike in prices caused by the reimposition of oil sanctions on Iran.
“We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices!” he tweeted.
“We will remember. The OPEC monopoly must get prices down now!”
Despite the threat, the group and its allies are unlikely to agree to an official increase in output, Reuters reported on Thursday, citing OPEC sources.
In June they agreed to increase production by about one million barrels per day (bpd). That decision was was spurred by a recovery in oil prices, in part caused by OPEC and its partners agreeing to lower production since 2017.
Known as OPEC+, the group of oil producers which includes Russia are due to meet on Sunday in Algiers to look at how to allocate the additional one million bpd within its quote a framework.
OPEC sources told Reuters that there was no immediate plan for any official action as such a move would require OPEC to hold what it calls an extraordinary meeting, which is not on the table.
Oil prices slipped after Trumps remarks, with Brent crude shedding 40 cents to $79 a barrel in early afternoon trade in London while US light crude was unchanged at about $71.12.
Brent had been trading at around $80 on expectations that global supplies would come under pressure from the introduction of US sanctions on Iranian crude exports on Nov. 4.
Some countries has already started to halt imports from Tehran ahead of that deadline, leading analysts to speculate about how much spare capacity there is in the Middle East to compensate for the loss of Iranian exports as well as how much of that spare capacity can be easily brought online after years of under-investment in the industry.
Analysts expect oil to trend higher and through the $80 barrier as the deadline for US sanctions approaches.
“Brent is definitely fighting the $80 line, wanting to break above,” said SEB Markets chief commodities analyst Bjarne Schieldrop, Reuters reported. “But this is likely going to break very soon.”