Oil prices rise on lower USA crude inventories, looming Iran sanctions
20 September, 2018, 15:59 | Author: Gerard Cortez
Oil climbed to a three-month high above $80 a barrel in London on Wednesday as fears of a supply crunch eclipsed concern about the risks to demand such as the U.S.
The market tumbled early in the session as investors focused on the bearish elements of the IEA report, said Bob Yawger, director of energy futures at Mizuho in NY.
Benchmark Brent crude futures were up $1.01 at $80.07 a barrel by 10:58 a.m. EDT (1458 GMT) after reaching $80.13 a barrel, its highest since May 22.
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"Oil prices jumped overnight as American Petroleum Institute inventory data showed a large drawdown in inventories", said William O'Loughlin, investment analyst at Australia's Rivkin Securities.
Global demand will hit a high of 100.3 million bpd in the final quarter of this year, before moderating to 99.3 mln bpd in the first quarter of next year, the agency said.
South Korea has made a decision to comply with USA demands to cut oil imports from Iran to zero, becoming the first to do so out of the top three buyers.
Russian Energy Minister Alexander Novak said US trade measures against China are also contributing to the instability in the Global oil market. Each of those countries usually imports between 500 to 700,000 barrels of Iranian oil per month, a number which may be reduced even though they aren't expected to completely cut ties with Iran.
OPEC said it expected demand growth of 1.41 million bpd in 2019, a 20,000-bpd downgrade from its previous forecast. This means there will be less strain on other producers in making up for supply losses from Venezuela and Iran as renewed US sanctions kick in. "Things are tightening up", it said.
London-traded Brent, which is more sensitive to global supply disruptions, widened to the largest premium to the USA benchmark crude in nearly three months.
"We are dealing with two issues separately and our stand has been communicated to the U.S.", added the official on being questioned to whether higher American oil imports could mean replacing Iranian crude.
Russian Energy Minister Alexander Novak on Wednesday warned of the impact of the US sanctions against Iran.
Iranian crude exports have fallen significantly before USA sanctions even take effect, the IEA said in a monthly report. Meanwhile, France and South Korea are shunning Iranian crude, forcing the Islamic Republic to effectively remove some oil from global markets.
"World demand will average 98.82 million bpd in 2018, a demand growth of 1.62 million bpd", said S&P.
Prices slipped again after U.S. President Donald Trump said in a tweet that the United States was under no pressure to make a trade deal with China, Yawger said.
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