USA bullying won't resolve supply shortage in oil market: Zanganeh

18 October, 2018, 09:06 | Author: Frank Williams
  • Oil prices rise on Saudi tensions; demand outlook drags

Iran blamed USA for the growing instability of the oil market and criticized its position of force under the pretext of reducing prices.

"The oil market is suffering from short supply and this can not be resolved by words".

'You cannot keep the price low with slogans and intimidation, ' considered Zanganeh.

Opec producers such as Saudi Arabia and allies including Russian Federation may have to reach deep into their spare production capacities to fill the potential supply gap.

Oil producers in the Permian Basin have started selling a new stream of light crude, said people familiar with the matter, securing a market for the increasingly less dense oil being pumped from the largest USA shale play. While buyers of Iranian crude are still awaiting possible waivers from the Trump administration, the International Energy Agency's executive director Fatih Birol urged Opec and other major producers to boost output as oil markets are entering the "red zone". The breakdown of the talks is equivalent to the Saudis and Kuwaitis agreeing to cut production by 500,000 barrels a day, said Phil Flynn, senior market analyst at Price Futures Group.

US President Donald Trump in May withdrew from the 2015 nuclear accord with Iran, reimposing economic sanctions against the Persian Gulf nation.

"The market is reacting to the unexpected decline as inventories tend to rise at this time of year", said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo, adding that anxieties about the outlook for the global economy were capping gains.

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Rates have cooled to around Dollars 81 in hope that the United States may extend deadline for imposing sanctions on Iran by a couple of months.

Saudi Arabia has been under pressure since Khashoggi, a critic of Riyadh and a USA resident, disappeared on October 2 after visiting the Saudi consulate in Istanbul. They also expect to see declines in stockpiles of gasoline by 1.52 million barrels and distillates by 1.5 million barrels.

Iran has lost some customers for its oil because of looming USA sanctions, but high prices are making up for the lost sales, Iranian Vice President Eshaq Jahangiri has said. Given the impact of rising oil prices on the rupee and India's trade deficit, his motivations were clear.

A claim by the United States that it aims to reduce Iran's oil exports to zero is a "political bluff", the head of the state-run National Iranian Oil Company was quoted as saying.

Investors worry Saudi Arabia could use oil supply to retaliate against critics.

Kloza said the increase in domestic oil production could take some of the heat of the situation with Saudi Arabia, but there are limits.

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