Wednesday, 21 November, 2018

Oil falls below $70 as supply risks assessed against Opec salvo

Oil prices climb as Iran sanctions loom Oil up over 2% on concerns over Iran, slower US output growth
Orlando Vargas | 16 September, 2018, 10:55

US crude oil exports were up by 787,000 b/d (nearly 80 percent) from the first half of a year ago to the first half of 2018.

More output by members of OPEC the Organization of Petroleum Countries was able to offset the seasonal declines by non-OPEC members, though supply from non-OPEC nations was up as well by 2.6 million barrels per day, led by the United States.

“In addition, there is a risk to growth from an escalation of trade disputes, ” the Paris-based agency said.

Oil prices had their worst day in nearly a month Thursday, hurt by the latest signs that OPEC is ramping up production.

"A drawdown in crude oil inventories isn't very comforting when you're going to lose a lot of Iranian crude in a couple of weeks", said Phil Flynn, an analyst at Price Futures Group.

In the U.S., crude inventories dropped by 5.3 million barrels to 396.2 million barrels last week, the lowest since February 2015, according to the Energy Information Administration data.

The deal, in place since January 2017, has effectively lifted prices from a slump in 2015 to current levels of roughly $79 a barrel for Brent crude and $69/Bbl for U.S. West Texas Intermediate, CNBC reported. Eyes will be on Iranian oil import data from China and India who typically import around 500-700k barrels.

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The market tumbled early in the session as investors focused on the bearish elements of the IEA report, said Bob Yawger, director of energy futures at Mizuho in NY.

Crude oil also surpassed hydrocarbon gas liquids (HGLs) to become the largest US petroleum export product, with 1.8 million b/d of exports during the same period.

With frequent attacks on Libya's production and falling output in Venezuela, traders are weighing up whether Opec and its allies, as well as the U.S., will be able to ward off supply shortages.

The International Energy Agency warned that although the oil market was tightening at the moment and world oil demand would reach 100 million barrels per day (bpd) in the next three months, global economic risks were mounting.

Despite fear of disruptions to global oil supplies and curbs on production, OPEC sees global oil supplies as sufficient - it's demand people should be worrying about.

Expect a major oil price rally in November as a direct result of sanctions on Iran, not to mention a moribund Venezuelan oil production, and USA oil reserves falling. In August, OPEC's second-largest producer saw near-record production at 4.65 million bpd.

Such concerns have prompted U.S. Energy Secretary Rick Perry to meet his Saudi and Russian counterparts in an effort to convince those two countries to keep oil output high in order to offset a reduction in future Iranian oil exports.

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