Published: Sun, September 16, 2018
Finance | By Loren Pratt

'Crucial period' for oil as Iran exports shrink: IEA

'Crucial period' for oil as Iran exports shrink: IEA

Oil prices rose on Wednesday following a report that crude inventories in the United States fell and as looming sanctions against Iran raised expectations of tightening supplies, with top producer Russian Federation warning of a "fragile" global crude market.

South Korea has become the first of Iran's top-three oil customers to cut imports to zero before US sanctions take effect in November. The sanctions will target Iran's oil exports from November.

Brent crude futures LCOc1 climbed 28 cents, or 0.4 percent, to $79.34 a barrel.

U.S. West Texas Intermediate (WTI) crude futures gained $1.95, or 2.9 percent, to $69.49 a barrel.

Prices extended gains in post-settlement trade after industry data from the American Petroleum Institute showed US crude inventories slumped 8.6 million barrels last week, versus analysts' forecasts of a 805,000-barrel decrease. This is the lowest since February 2015, according to the US Energy Information Administration data.

Washington is putting pressure on other countries to also cut Iran imports, with close allies like South Korea and Japan, but also India, showing signs of falling in line.

Further oil price increases could trigger a slowdown in domestic or global economic growth, which could further complicate the U.S.' Iran policy and Trump's domestic political situation.

US Energy Secretary Rick Perry met Saudi Energy Minister Khalid al-Falih on Monday in Washington, as the Trump administration encourages big oil-producing countries to keep output high.

The issue of additional USA sanctions that are being imposed on Iran was again a major subject of market attention, with Russian Energy Minister Alexander Novak warning of the impact that the the United States action could have on Iranian oil sales.

Further dashing USA hopes of crushing Iranian oil exports have been recent announcements from Iran's top two customers, China and India, that they would continue to import Iranian crude despite the looming threat of US sanctions.

"Things are tightening up", the agency that advises Western governments on energy policy said in its monthly report. Novak did not provide details.

The 15-nation cartel's individuals agreed to originate up raising output starting in July this year to stabilize markets and offset losses in most important suppliers Iran and Venezuela, OPEC's third and sixth-greatest producers, respectively.

The cash-settled future will be based on a daily assessment by pricing agency S&P Global Platts for a "WAF index" backed by the four grades, each of which would carry a weighting of 25 per cent, according to a note on the ICE website, Reuters reported yesterday.The contract will be based on the differentials of the four crudes to the dated Brent benchmark and would represent 1,000 barrels of oil.

The NOC has continued to function relatively normally amid chaos in Libya.

OPEC said it expected demand growth of 1.41 million bpd in 2019, a 20,000-bpd downgrade from its previous forecast.

The softness in recent days has taken the wind out of the sails of crude oil, but it does not mean we are on the verge of another downturn.

London-traded Brent, which is more sensitive to global supply disruptions, widened to the largest premium to the US benchmark crude in nearly three months.

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