Oil prices extend gains after USA sanctions against Iran

10 August, 2018, 03:40 | Author: Lora Ball
  • A man pumps gas into his car at a gas station in Caracas

Front-month Brent crude oil futures was down $2.52, 3.4 percent, at $72.13 a barrel by 11:51 a.m. ET (1551 GMT).

An Iranian newspaper reported that Foreign Minister Mohammad Javad Zarif said a US plan to reduce Iran's oil exports to zero will not succeed.

USA sanctions on Iran's energy sector are set to be re-imposed after a 180-day "wind-down period" ending on November 4.

China's July crude oil imports recovered slightly in July after falling for the previous two months, but were still among the lowest this year due to a drop-off in demand from the country's smaller independent, or "teapot", refineries.

Brent and West Intermediate Texas crudes traded generally sideways last week, despite the pronounced weakness at the end of the week. Tuesday's sanctions primarily hit Iran's ability to function in global financial markets. "Iran sanctions will take another 1 million bpd off the markets", warning that this would leave markets with little spare capacity to deal with unforseen disruptions.

"If we get below $66 here, you're arguably violating the long-term uptrend channel", he said, referring to USA crude's upward trajectory this year.

The renewed sanctions will not directly target Iranian oil until November, although U.S. President Donald Trump has said he wants as many countries as possible to cut their imports of Iranian crude to zero. Iran is the third-largest producer in oil cartel Opec. The U.S. crude oil production went down to 10.8 million barrels per day.

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Also weighing on prices, the U.S. Energy Information Administration reported that crude inventories fell just 1.4 million barrels in the latest week, less than half the 3.3 million-barrel draw analysts had expected. Earlier today, crude oil sold off after it was announced that Saudi Arabia has resumed oil shipments through the Red Sea shipping line of Bab al-Mandeb over the weekend.

As recently as June, China was the top foreign buyer of United States crude, importing a record 15 million barrels that month.

For the past week, crude imports averaged 7.9 million barrels a day, up by 182,000 compared with the previous week.

Oil prices dropped nearly 4 per cent yesterday amid deepening concerns over the US-China trade war and continued signs of a slowdown in Chinese energy demand.

Analysts in a Reuters poll had expected stocks to drop by 3.3 million barrels.

Meanwhile, traders looked ahead to a report from The American Petroleum Institute on US crude inventory, due this evening. In Europe, spot demand for Iranian crude is sharply down, but refiners with term contracts are still honoring them, according to sources who spoke to Platts.

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