Oil prices near $80 a barrel as concern grows over global supply

20 September, 2018, 15:59 | Author: Frank Williams
  • Oil prices climb as Iran sanctions loom

John Kemp, market analyst for Reuters, views 2019 is a radically different light: on Wednesday he stated in an opinion piece that "Slower growth in US production, when combined with strong demand, production problems in Venezuela and other countries, and the re-imposition of sanctions on Iran, is enough to tighten the global market in late 2019".

Futures in NY dropped as much as 1.8 percent after closing at the highest in nearly two months.

Brent crude futures slipped 38 cents, or 0.5 per cent, to $79.36 a barrel.

Venezuela, which is pumping at just half the rate it managed in early 2016, could see its output slump another 19 percent to 1 million barrels a day this year as infrastructure deteriorates and workers flee, the agency predicted.

Buyers have asked to lift more Saudi oil than contracted volumes in October amid fears that the sanctions, to be imposed on Iran's crude exports from November 4, will crimp supply during peak winter demand in Asia, the sources said.

The deliberate spike in production was prompted by concerns about global supply and USA sanctions against Iran that go into effect in November.

A report showing declining US crude inventories also supported prices.

World oil consumption will top 100 million barrels per day (bpd) in the next three months, putting upward pressure on prices, although emerging market crises and trade disputes could dent this demand, the International Energy Agency said on Thursday.

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The U.S. tariffs against China could reduce that country's demand for crude oil. This means there will be less strain on other producers in making up for supply losses from Venezuela and Iran as renewed USA sanctions kick in.

"Iran is increasingly becoming the preoccupation of the crude market", said consultants JBC Energy.

Gasoline stocks rose 1.3 million barrels, while distillate stockpiles, which include diesel and heating oil, climbed by 6.2 million barrels, the EIA data showed. As Florence moves closer to the southeastern coast of the USA, the storm appears likely to strengthen, forecasters said.

"We think oil market fundamentals are increasingly supportive of crude prices, at least at current levels", said Gordon Gray, HSBC's global head of oil and gas equity research.

It reported Iranian crude production fell 200,000 b/d from July to 3.52 million b/d in August as the re-imposition approached.

OPEC said the world will need 32.05 million bpd from its 15 members in 2019, unchanged from last month.

However, the dips could be short-lived as Hurricane Florence is expected to hit US East Coast on Friday, adding to supply concerns associated with the looming sanctions on Iran.

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