Oil up but set for weekly loss on stock build, trade row

Ivan Schwartz
October 21, 2018

Oil edged higher on Thursday, driven by the prospect of a shortfall in global supply once US sanctions against major crude exporter Iran come into force in just five weeks' time.

Oil crept up on Thursday amid ongoing tensions over the death of a prominent Saudi journalist, with prices steadying after a big drop overnight due to a jump in United States crude stockpiles.

"We have various ways of selling our oil and when the tankers reach Dalian, we will decide whether to sell it to other buyers or to China", the source said.

"While the correlation between oil and equities tends to come and go, the relationship has been strong of late as the oil complex has been able to put some seemingly bullish geopolitical developments on hold for now while focusing, instead, upon some significant loosening in global oil balances", Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

He also said that Brian Hook, the Special Envoy of the USA on Iran, visited India and held discussions with several officials and interlocutors in different ministries.

A heavy sell-off in global equity markets also rattled nervous investors, with all the three major US indices slumping over 1.7 percent in late trading on Thursday.

Refiners around the world are under pressure to avoid Iranian oil purchases because they want to maintain their access to the U.S. financial system - something they could lose if they flout the USA sanctions.

November natural-gas futures NGX18, +1.03% rose 1.6% to $3.25 per million British thermal units, leaving it with a weekly advance of 2.8%.

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There is no way to wield the oil weapon, which would not shake the foundations of the U.S. -Saudi alliance on which the kingdom's defense depends, leaving it vulnerable to regional rivals, including Iran. However, while Iran's floating storage spiked in September, it actually fell back in October, "as several cargoes set sail for China and India, data from Kpler showed", the IEA wrote in its report.

Iranian exports have slumped by 30%, or over 800,000 bpd, over the past six months as buyers have shunned purchases to avoid the risk of being cut off from the USA financial system.

Oil prices slumped on Wednesday, as official data showed that US crude stockpiles rose for a fourth straight week.

Kardor said Iran did not have any difficulties receiving payments for oil exports and said the Islamic Republic could accept payments in euros instead of dollars if necessary.

An SPR release is a one-off affair, and many analysts - and even the U.S. Secretary of Energy Rick Perry - have said that it would do very little to ease a supply shortage.

"Sentiment in the futures market seems to have cooled", said Carsten Menke, an analyst at Bank Julius Baer & Co.in Zurich.

OPEC has little spare capacity to make up for any drop in exports from Iran, which is the group's third-largest producer. The document went on to note that "the upward trend in USA crude oil production, could be a bearish factor for oil prices in the coming few weeks".

This indicates rise in supply that would exceed demand, thus prices might remain in the range of $70 to $80 per barrel.

Other reports by GizPress

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