Oil prices rise amidst United States sanctions against Iran

Gladys Abbott
August 9, 2018

The agency slightly increased its expectation for 2019 production growth to 1.02 million bpd from 1.01 previously. That figure is roughly equivalent to 3 percent of the world's oil demand.

Meanwhile, stockpiles of gasoline and distillates, which include diesel and heating oil, rose more than expected.

As reported by Bloomberg, Saudi Energy Minister Khalid al-Falih promised to add, in cooperation with other OPEC allies, about one mmbbl of oil.

The balance, however, could be disrupted by potential sanctions by China against USA oil imports and unplanned supply disruptions. USA gasoline stocks climbed 2.9 million barrels last week to 233.87 million barrels, while distillate stocks were up 1.23 million barrels at 125.42 million barrels.

Brent calendar spreads have also been sliding since late April as traders anticipated greater availability of crude in the second half of the year.

Total estimated export volumes on Aframaxes, Suezmaxes and VLCCs from Iranian ports in July fell by 7% to 2.32 million b/d from 2.49 million b/d in June, according to data from S&P Global Platts trade flow software cFlow.

Front-month Brent crude oil futures were down 67 cents at $73.98 a barrel by 1300 GMT. At the end of the week, WTI settled at 68.49 US dollars, while Brent settled at 73.21 dollars.

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Futures for September delivery lost 2.9 per cent to CNY 521.9 a barrel on the Shanghai International Energy Exchange.

The oil shipments into the world's biggest importer of crude came in at 36.02 million tons last month, or almost 8.48 million barrels per day, higher from 8.18 million barrels per day a year ago, and just over June's 8.36 million barrels per day, according to the data from the General Administration of Customs.

"You can not order 2 million barrels like ordering a coffee somewhere", Beat Wittmann, a partner at financial consultancy Porta Advisors, told CNBC recently. Some 19 million and 4.8 million barrels per day of oil pass through the Straits of Hormuz and Bab el-Mandeb, respectively. Distillate production averaged 5.2 million barrels a day last week, flat compared to the prior week's production. The buildup was mainly due to 9.6 million barrels of lower exports for the week ending July 27, compared with the previous weekly report levels.

Some sources have said with exports falling, Iran's domestic refinery runs have increased, with a pick-up in gasoline output observed at some of its refineries, and more barrels are expected to go onto floating storage.

US gasoline futures fell 3.8 percent to $2.025 per gallon. China's foreign ministry on Wednesday stated that Beijing will continue its business with Iran as does not violate any UNSC resolution. As of last night's close, Chevron shares are trading up about 12.5% over the past year.

This time around, some of Iran's former creative methods in trade with Asian customers, including a barter system which avoids sanctionable transfers to the nation, may also work with the Europeans.

The VanEck Vectors Oil Services ETF (NYSEAMERICAN: OIH) traded down about 0.3%, at $25.64 in a 52-week range of $21.70 to $29.87.

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