Oil prices steady as OPEC supplies weigh but Iran sanctions loom

The high rig count has helped lift US crude oil production by more than 30 percent since mid-2016, to 11 million barrels per day. (Reuters)
Updated 03 September 2018
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Oil prices steady as OPEC supplies weigh but Iran sanctions loom

  • Output OPEC rose by 220,000 barrels per day between July and August
  • Meanwhile, US drillers added oil rigs for the first time in three weeks

SINGAPORE: Oil prices were stable on Monday, weighed down by rising supply from OPEC and the United States but supported by concerns that falling Iranian output will tighten markets once US sanctions bite from November.
International Brent crude oil futures were at $77.67 per barrel at 0651 GMT, up 3 cents from their last close.
US West Texas Intermediate (WTI) crude futures were at $69.73 per barrel, down 7 cents from their last settlement.
Output from the producer group Organization of the Petroleum Exporting Countries (OPEC) rose by 220,000 barrels per day (bpd) between July and August, to a 2018-high of 32.79 million bpd, a Reuters survey found.
Output was boosted by a recovery in Libyan production and as Iraq’s southern exports hit a record.
Meanwhile, US drillers added oil rigs for the first time in three weeks, energy services firm Baker Hughes reported on Friday, increasing the rig count by 2 units to 862.
The high rig count has helped lift US crude oil production by more than 30 percent since mid-2016, to 11 million bpd.
Despite the price dip, Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA said Brent was “supported by the notion that US sanctions on Iranian crude oil exports will eventually lead to constricted markets,” which he said would likely push up prices.
“Iranian production is already showing signs of decline, falling by 150,000 barrels per day (bpd) last month ... (as) importers of Iranian barrels will already be moving away from taking shipments,” said Edward Bell, commodity analyst at Emirates NBD bank in Dubai.
Many analysts have warned that an economic slowdown because of trade disputes between the United States and other major economies including China and the European Union would drag on oil demand.
Amid rising trade tariffs raised by Washington and Beijing, China’s manufacturing activity grew at the slowest pace in more than a year in August, with export orders shrinking for a fifth month and employers cutting more staff, a private survey showed on Monday.
Despite this, OANDA’s Innes said it was too early to say whether an economic slowdown would put a serious dent on oil prices.
“While the analysts continue fretting that $200 billion in tariffs could drag down oil demand, it isn’t at all clear that such type of economic headwinds will topple oil prices given ... the constant barrage of supply outages,” he said.


OPEC chief: Group must stay together as US sanctions Iran

Updated 26 min 23 sec ago
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OPEC chief: Group must stay together as US sanctions Iran

  • Production cut agreement now a "permanent feature"
  • Brent already near $80 per barrel

FUJAIRAH: OPEC must stick together for the good of the global economy as founding member Iran faces renewed US sanctions, the head of the group said Tuesday — though he did not address how an already-tight market will make up for the loss of Iranian supply.
Mohammed Sanusi Barkindo also said an agreement between OPEC and non-members that cut production and helped bring prices back up from lows of $30 a barrel in January 2016 was now “a permanent feature.”
Cementing that arrangement would be one of the topics of discussion as OPEC meets this Sunday in Algeria, he added.
Still, OPEC will face rising anger from Iran, which feels increasingly under pressure after President Donald Trump pulled out of the landmark nuclear deal between Iran and world powers in May.
Crushing US oil sanctions on Iran will resume in early November and already, American allies in Asia are cutting back on their purchases of Iranian crude.
The US moves have gotten furious reactions from Iran, especially amid talk of American officials asking Russia and Saudi Arabia to make up the difference.
“Mr. Trump’s attempt to prevent Iran from appearing on the global crude oil markets has allowed Russia and Saudi Arabia, which would not favor low prices, to pursue hostage-taking policies in the market,” Iranian OPEC governor Hossein Kazempour Ardebili said on Saturday.
Barkindo said: “Iran is not only a founding member of OPEC, it’s a very important member of this organization. We have no choice but continue to work with all parties.”
Benchmark Brent crude already is nearing $80 a barrel and analysts believe it may go even higher as production remains low. A loss of Iranian supply likely will further drive up prices.
Trump, facing midterm elections in the US, already has called for more oil production from Saudi Arabia and OPEC to bring down prices with limited effect. A gallon of regular gasoline costs on average $2.85 in the US, up from $2.62 a year ago, according to AAA.
Barkindo praised the agreement between OPEC and non-members that cut production and said the cartel would work to make it permanent.
“The declaration of cooperation has come to stay,” he said.