U.S. oil hits 4-year peak ahead of sanctions on Iran

03 October, 2018, 18:11 | Author: Frank Williams
  • King Salman

Global benchmark Brent crude traded at around $83.01 on Monday, up around 0.34 percent, while US West Texas Intermediate (WTI) stood at around $73.42, more than 0.2 percent higher. WTI has risen around 18 percent since mid-August.

Brent crude oil futures LCOc1 were trading at $83.04 per barrel at 0057 GMT, up 31 cents, or 0.4 percent, from their last close and near the $83.07 level reached during the last session - the highest since November 2014. In post-settlement trade, the contract continued to strengthen, rising to US$85.45 a barrel, the first trade above US$85 since November 2014.

A Reuters survey of oil supply from OPEC countries showed that production in Iran decreased by 100,000 bpd in September to stand at 3.45 million bpd.

US President Donald Trump and Saudi Arabia's King Salman have discussed last week about the efforts being carried out to keep supplies to sustain oil market stability and global economic growth.

"Against this backdrop of dwindling Iranian oil supplies, the focus will turn to meek levels of global, or more accurately, Saudi spare capacity", Stephen Brennock of PVM Oil Associates said in a note, according to CNBC.

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"The market's very keen to figure out the size of impact from the Iranian supply disruptions and whether Saudi Arabia and Russian Federation are able to make up for the losses", Kim Kwangrae, a commodities analyst at Samsung Futures Inc., said by phone. In May, Iran sold 2.71 million bpd overseas, almost three percent of daily global oil consumption.

That comes as the overall supply of oil looks set to decline, post United States sanctions against Iran and despite increases from Russian Federation and Saudi Arabia.

Citigroup Inc. has a warning for USA oil investors: American crude prices may tumble to the steepest discount against global benchmark Brent since 2013. China's Sinopec said it halved loadings of Iranian oil in September. Analysts say prices likely will go higher as American sanctions on Iran resume in November.

With oil prices soaring, there are concerns over their inflationary effect on demand growth, especially in Asia's emerging markets where weakening currencies are further adding to high fuel import costs. Britain's Barclays bank, however, said "OPEC has ample spare capacity".

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