Oil edges up on supply concerns

Gladys Abbott
September 21, 2018

Oil prices were steady on Wednesday as concerns that producers will not be able to respond to a shortfall in supply once USA sanctions on Iran are enacted outweighed a gain in stockpiles in the United States, the world's biggest oil user.

Data from the InterContinental Exchange showed open interest in calls that give the owner the right to buy Brent futures at $80 and $85 by next week grew by almost 45 percent on Monday and Tuesday to an equivalent of 54 million barrels of oil.

U.S. West Texas Intermediate (WTI) crude CLc1 gained 94 cents to settle at $69.85 a barrel, a 1.4 percent increase.

Reuters previously reported that Saudi Arabia wants oil to stay between $70 and $80 a barrel for now, as the world's biggest crude exporter strikes a balance between maximizing revenue and keeping a lid on prices until USA congressional elections.

"Saudi Arabia and the UAE are turning OPEC into a tool for the USA and consequently the organization has not much credit left", Iran's OPEC governor Hossein Kazempour Ardebili told the Shana newswire, affiliated to Iran's Oil Ministry.

United States crude inventories likely fell 2.5 million barrels last week, according to a Bloomberg survey of analysts.

OPEC Secretary-General Mohammed Sanusi Barkindo says that "Iran is not only a founding member of OPEC, it's a very important member of this organization".

Iran's oil exports have been falling in recent months as more buyers, including its second-largest buyer India, cut imports ahead of US sanctions that take effect in November.

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US crude stockpiles rose by 1.2 million barrels to 397.1 million in the week to September 14, the American Petroleum Institute said. Iran's crude exports are already falling as the USA prepares to curb Tehran's ability to sell oil and participate in global financial markets.

Reuters previously reported Saudi Arabia wants crude to stay between $70 and $80/Bbl maximizing revenue and keeping a lid on prices until USA congressional elections.

Russian Energy Minister Alexander Novak said on Monday that all possible scenarios for oil output could be discussed at a meeting of OPEC and non-OPEC states in Algeria this month, Reuters reports.

Bloomberg reported on Tuesday, citing unnamed Saudi sources, the kingdom was now comfortable with prices above $80 per barrel, at least for the short-term.

Traders work in the crude oil and natural gas options pit on the floor of the New York Mercantile Exchange.

Official inventory data from the U.S. Energy Information Administration will be released later on Wednesday. "I think that is going to remain the theme for the next six weeks until the next round of USA sanctions against Iran kick off".

Beijing on Tuesday quickly added US$60 billion of U.S. products to its import tariff list in retaliation for President Donald Trump's planned levies on US$200 billion worth of Chinese goods.

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