Oil prices inch up as supply concerns outweigh US output assurances

Ann Santiago
September 22, 2018

The longer-term outlook remains weighed down, however, by an escalation in the China-U.S. trade war that has clouded the outlook for crude demand.

U.S. crude futures were down 6 cents at $69.79, after gaining 1.4 per cent the day before.

Commenting on Iran's oil supply, "we believe that the full effect of the Iranian oil sanctions has yet to be seen and we feel that the next 5-6 week anticipatory phase of the official sanctions will associate with steady speculative buying interest", Jim Ritterbusch, president of Ritterbusch and Associates, told Reuters on Monday.

Since spring when the Trump administration said it would impose the sanctions, crude traders have priced in a risk premium reflecting the supply shortages that may occur when exports from Iran, the third-largest OPEC producer, are cut.

The head of Opec has said the oil cartel must stick together for the good of the global economy as Iran faces renewed United States sanctions.

Brent crude futures dropped 44c, or 0.6%, to $77.61 a barrel by 4.24am GMT.

The trade dispute is raising concerns about the potential for slower growth in oil consumption, offsetting supply concerns stemming from the upcoming USA sanctions on Iran over its nuclear program. "The impact on economic growth is slowly dripping in, which again hurts oil prices", Wang Xiao, head of crude research at Guotai Junan Futures, said on Tuesday.

He did not specify how crude producers would compensate for declining exports from Iran, with new USA sanctions due to hit the Islamic republic´s oil industry on November 4.

Oil prices firmed on Tuesday after Saudi Arabia indicated it was comfortable with a higher price range ahead of a meeting between major producing countries in Algeria.

The rally could stop and prices could turn lower if someone counters with concerns over future demand in the wake of the announcement of additional tariffs on China by the United States.

Reuters previously reported Saudi Arabia wants crude to stay between $70 and $80/Bbl maximizing revenue and keeping a lid on prices until US congressional elections.

Prices pared gains in post-settlement trade after data from industry group the American Petroleum Institute showed USA crude inventories rose by 1.2 million barrels in the week to September 14 to 397.1 million, compared with analysts' expectations for a decrease of 2.7 million barrels.

Opec secretary-general Mohammed Sanusi Barkindo said: "Iran is not only a founding member of Opec, it's a very important member of this organisation".

Energy ministers of Saudi Arabia, a U.S. ally, and Russian Federation said in May they were prepared to ease output cuts to calm consumer worries about supply.

Other reports by

Discuss This Article