Oil hits $80 as Iran fears mount

Irving Hamilton
September 14, 2018

US crude stocks fell 5.3 million barrels in the week to September 7 to 396.2 million barrels, the lowest since February 2015 and about 3 percent below the five-year average for this time of year, the US Energy Information Administration (EIA) said on Wednesday. Yesterday's close above the key resistance line paves the way for a test of the $80 barrel mark, before a retest of the YTD high.

Brent crude futures slipped 38 cents, or 0.5 per cent, to $79.36 a barrel.

The IEA said tightening supply was putting increasing pressure on prices.

US sanctions on Iran's energy industry, which come into force in November, have already cut supply back to two-year lows, while falling Venezuelan output and unplanned outages elsewhere will also keep the balance between supply and demand tight, the IEA said.

Russian energy minister Alexander Novak on Wednesday warned of the impact of US sanctions against Iran.

He also warned of the impact of United States sanctions against Iran: "This is a huge uncertainty on the market - how countries, which buy nearly 2 million barrels per day of Iranian oil, will act".

"According to Bloomberg, in case the Iran sanctions come into place, oil price could go up to $150 a barrel", reported ET.

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Brent crude, the global benchmark for oil, has been trading between $70 and $80 since April, only briefly rising above $80 in May and this week. Oil production has been hit by attacks on oil facilities and blockades, though a year ago it partially recovered to around one million barrels per day.

Russian Energy Minister Alexander Novak said on Tuesday that Russia and a group of producers around the Middle East dominated Organization of the Petroleum Exporting Countries (OPEC) may sign a new long-term cooperation deal at the beginning of December, the TASS news agency reported.

Their combined output has risen by 3.8 million bpd since September 2014, more than the peak output Iran has managed over the last three years.

That month Russian Federation produced 11.247 million bpd, a post-Soviet Union record-high.

Although the shipment hiatus is unlikely to signal that China has been purposefully scaling back purchases to comply with USA pressure to have Iranian oil sales at zero, it could mean that Chinese refiners were looking for better terms for Iranian oil purchases, according to Bloomberg.

The US crude production is expected to rise 840,000 bpd to 11.5 million bpd next year, lower than a previous expectation for a rise of 1.02 million bpd to 11.7 million bpd, the US Energy Information Administration said in a monthly report.

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