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

Galtero Lara
Setiembre 14, 2018

Oil prices eased on Wednesday, having neared its highest level this year after a drop in US crude inventories and the prospect of the loss of Iranian supply added to concerns over the delicate balance between consumption and production.

Total Iranian oil shipments for September-although we're just one third into the month and more tankers could leave later in September-slumped to 1.3 million bpd through September 13, compared to just above 2 million bpd in August, when Iranian exports started to fall noticeably, according to Bloomberg's data.

Oil markets are also watching Hurricane Florence offshore the United States, amid surging demand for gasoline and diesel, although crude output will not be affected on the storm's current route, according to CNBC.

USA crude stocks fell by 8.6 million barrels in the week to September 7 to 395.9 million, the American Petroleum Institute (API) said on Tuesday.

"Markets. are expecting substantial price pressure as Iran sanctions loom", said Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA in Singapore.

Brent crude futures traded at $79.20 a barrel while USA crude futures rose 61 cents to $69.86 a barrel.

Since spring, when the Trump Administration said it would impose sanctions on Iran, traders have been focusing on the impact they could have on global supply. "The situation in Venezuela could deteriorate even faster, strife could return to Libya and the 53 days to November 4 will reveal more decisions taken by countries and companies with respect to Iranian oil purchases", the IEA said, referring to the day USA sanctions on Iran take effect.

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Benchmark Brent crude oil was up 50 cents at $77.87 a barrel by 0750 GMT. "This is a huge uncertainty on the market - how countries, which buy nearly 2 million barrels per day of Iranian oil, will act". Oil production has been hit by attacks on oil facilities and blockades, though past year it partially recovered to around one million barrels per day.

In its monthly report, OPEC said world oil demand next year would rise by 1.41 million barrels per day (bpd), 20,000 bpd less than last month and the second consecutive reduction in the forecast.

The Paris-based IEA maintained its forecast of strong growth in global oil demand this year of 1.4 million bpd and another 1.5 million bpd in 2019, unchanged from its previous projection.

Tighter Supply Despite this, the short-term outlook for oil markets is for tighter supply.

That month Russian Federation produced 11.247 million bpd, a post-Soviet Union record-high.

WTI was pushed over $70 during the previous session due to falling crude inventory and production levels.

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