February 19, 2019

Iran says oil price rally offsetting USA sanctions impact

07 October 2018, 05:13 | Joann Bryant

Ilya Naymushin Reuters

Russian oil production jumps to post Soviet high

"Crude oil prices drifted lower (on Thursday) on combination of rising oil production in Saudi Arabia and Russian Federation and a build-up of inventories in the U.S. That said, prices remained resilient as supply worries persist amid looming Iranian sanctions", ANZ bank said on Friday.

Brent has risen by around 20 percent from its most recent lows in August, while the U.S. West Texas Intermediate (WTI) crude futures were up 25 cents, or 0.3 percent, at $75.55 a barrel.

Meanwhile, the United States benchmark crude oil fell 0.24 per cent to Dollars 76./23 a barrel, while Brent crude slid 0.22 per cent, at USD 86.10 a barrel.

The investment bank said there was enough oil to meet demand, but "global spare capacity is dwindling to the lowest level that we can document. meaning any further supply disruptions would be hard for the market to manage - and could lead to spiking crude oil prices".

Futures were trading around $75.50 a barrel in NY, up around 0.4 percent.

"If Genscape is right and we do have more oil then the drop in inventories we witnessed over the previous year plus is coming to an end", said Gene McGillian, manager of market research at Tradition Energy.

However, high crude prices, combined with widespread emerging market currency weakness, threaten growth. The contract was up 2.2 percent this week. The global benchmark crude traded at a US$9.96 premium to WTI for the same month.

The US is going extra lengths to find substitute for Iranian oil for countries like India and Iraq, the White House has said, as the Trump administration prepares to impose sanctions on nations defying its directive to bring their oil imports from the Gulf nation to zero by November 4. Originally, the plan had apparently been to officially announce a production increase of 500,000 barrels per day, but this met with opposition from a number of countries, including Iran.

"Iranian exports could fall below 1 million bpd in November", U.S. bank Jefferies said. Analysts doubt if Saudi Arabia can produce much above current near-record levels. West Texas Intermediate gained almost $2 a barrel to trade above $76.

The Energy Information Administration on Wednesday reported that USA crude imports gained while exports slid by the most since late July. Refinery crude runs fell by 158,000 barrels per day (bpd), API data showed.

Due to effect delivery and payment processes, the effects of the sanctions to be imposed on Iran started to impact the market on September 20, according to information compiled from the Iranian Embargo-Turkish Straits report prepared by the Bilkent University Energy Policy Research Center (EPRC).

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