China may boost Iranian oil purchases once U.S. sanctions step into force

21 July, 2018, 15:42 | Author: Kevin Carter
  • Chairman of the Joint Technical Committee and Saudi governor for OPEC Adeeb Al Aama in this file

Crude prices fell from session highs reached after Saudi Arabia's OPEC Governor Adeeb Al-Aama statement that the kingdom expects crude exports to drop by roughly 100,000 bpd in August as it limits excess production.

U.S. West Texas Intermediate crude was down 27 cents, or 0.4 percent, at $67.82.

Oil rose in response to the ministry's statement and Brent crude, the worldwide benchmark, was 0.5 percent higher at $72.92 a barrel in London as of 8:13 a.m. on Friday.

Oil companies are planning to make up for the shortfall by increasing purchases from other Middle Eastern suppliers, such as Saudi Arabia, since imports of Iranian crude will likely stop by around October, the sources said. "Just as Saudi Arabia would not like to see unmet customer demand, an oversupplied market repels potential investment in the oil industry, curtailing future supply and contributing to volatility".

On Wednesday, Crude oil futures for August recovered from one-month lows and settled 1% up, as concerns over supply disruptions re-emerged on reports that Venezuela's Amuay oil refinery has shut down a distillation unit.

Kansas City Federal Reserve Bank President Esther George said on Tuesday uncertainty over USA trade policy could slow the economy, even if recently imposed tariffs are too small to have a big impact.

Futures rose as much as 2.1% in NY on Thursday, reversing early-morning losses.

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Data from the Energy Information Administration showed that gasoline inventories fell by 3.2 million barrels last week while stockpiles of distillates, such as diesel and heating oil, dropped by 371,000 barrels. Japanese suppliers of Iranian oil - JXTG Holdings and Idemitsu Kosan - received a warning from the U.S. about the need to completely stop imports by November 4, 2018, when Washington plans to resume sanctions against Tehran.

The Energy Information Administration reported USA crude inventories rose by 5.84 million barrels last week, confounding most analysts in a Bloomberg survey who were forecasting a decline.

Ever since Donald Trump pulled the USA out of the 2015 Iran nuclear deal, otherwise known as the Joint Comprehensive Plan of Action (JCPOA), the U.S. has been warning its allies and even some neutral countries about the importance of ending their reliance on Iranian oil before the November deadline when United States sanctions will snap back into place. The goal is to bring down oil prices-and gasoline prices-ahead of the mid-term elections in November, the same month in which the renewed USA sanctions on Iran are returning.

Saudi Arabia has told Opec it pumped 10.488 million bpd of crude oil last month, an increase of 458,000 bpd from the level it said it produced in May.

Oil prices dropped on Wednesday after an industry group reported that US crude inventories rose last week, defying analyst expectations for a significant reduction.

U.S. crude stocks rose by 5.8-million barrels last week, compared with a forecast of a decline of 3.6-million barrels.

However, comments by Saudi Arabia's Energy Ministry, pledging not to flood world markets with oil, turned the momentum around on Thursday and helped the commodity to rebound sharply from an intraday low level of $66.62.

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