Oil prices rise as looming Norway strike adds to disruptions

Galtero Lara
Julio 12, 2018

Adding to the bearish mood were signs of a possible relaxation of US sanctions on Iranian crude exports.

OPEC and other key producers including Russian Federation responded to the tightness by easing a supply-cut agreement, with Saudi Arabia vowing to support the market as US President Donald Trump accused the group of pushing prices higher. "If these tariffs are introduced, there will be an impact on global growth and demand".

China and India, the world's second and third largest oil consumers, could face "major challenges" in finding alternative crude oil following the drop in Iranian and Venezuelan exports, the IEA said.

Global benchmark Brent crude traded at around $74.57 on Thursday morning, up around 1.6 percent, while U.S. West Texas Intermediate (WTI) stood at $70.65, up nearly 0.4 percent. China is a top buyer of USA crude, and has said it could tax US oil if trade tensions escalate.

"Libyan relief changes the conversation about spare capacity", said John Kilduff, a partner at Again Capital Management.

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De factor OPEC leader Saudi Arabia ramped up its crude production in June to the highest level since the end of 2016, making good on its recent pledge to tame oil prices.

The global energy watchdog, however, said the disruptions underscored the pressure on global supplies as the world's spare production capacity cushion "might be stretched to the limit".

Washington had previously said countries must halt all imports of Iranian oil from November 4 or face USA financial restrictions, with no exemptions.

According to the Energy Information Administration (EIA) on Wednesday, the US' oil reserves tumbled by 12.6 million barrels, bringing the USA stocks total supply down to 405 million barrels. Supply to the US market has also been squeezed by the loss of some Canadian oil production.

"In spite of the extraordinary draw in crude oil inventories, the market is under pressure after refiners produced a record amount of gasoline this week and in conjunction with a greater than expected build in distillate inventories", said Andrew Lipow, president at Lipow Oil Associates in Houston. "We see no sign of higher production from elsewhere that might ease fears of market tightness", it said.

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