Oil Prices Rise As US Sanctions On Iran Tightens Market

Oil steady as emerging market woes dim demand outlook

Oil prices moved sharply lower on Monday after data suggested inventories at the US crude delivery hub rose in the latest week, compounding worries that troubled emerging markets and trade tensions will dent the outlook for fuel demand.

Iran ranks second globally in natural gas reserves, fourth in proven crude oil reserves and is the Organization of the Petroleum Exporting Countries (OPEC) third-largest producer, exporting about 2 million barrels of crude per day. U.S. West Texas Intermediate (WTI) crude declined $1.83 to $65.80 a barrel, a 2.7 per cent loss.

Analyst say trade disputes between the United States and China as well as turmoil in emerging markets could curb growth and energy demand.

The overall demand for Opec's crude is now expected to be 32.9 million barrels a day this year, which is around 600,000 barrels a day lower than in 2017.

"Healthy global economic developments and increased industrial activity should support the demand for distillate fuels in the coming months, leading to a further drawdown in diesel inventories", it said. "If the crisis spread to other, larger (emerging) countries, though, demand would be hit considerably". The United States has started implementing new sanctions against Iran, which from November would also target the country's petroleum sector.


Hedge funds and other money managers reduced their bullish positions in US crude futures and options in the week ending on August 7, data from the US Commodity Futures Trading Commission showed on Friday. Meanwhile, Opec raised production in July, with increases in output from Kuwait, Nigeria and the United Arab Emirates.

The drop in demand for OPEC crude means there will be less strain on other producers in making up for supply losses in Venezuela and Libya, and potentially in Iran as renewed USA sanctions kick in.

"If 1 million bpd or more of Iranian exports go AWOL, the current fragile supply-demand balance will be upended, potentially sending oil prices above the May peak".

In a monthly report, OPEC said the world will need 32.05 million bpd of crude from its 15 members in 2019, down 130,000 bpd from last month's forecast.

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