Oil prices higher as U.S. sanctions limit Iran exports

Donald Trump and Hassan Rouhani

Donald Trump and Hassan Rouhani

Stephen Innes, head of trading for Asia-Pacific at brokerage OANDA, said Brent was "supported by the notion that US sanctions on Iranian crude oil exports will eventually lead to constricted markets", Reuters reported.

Considering the looming impact of the trade war between the United States and other major economies, including Iran, China and the European Union, OPEC's output witnessed an increase of 420,000 barrels a day from July. "Is demand going to continue as strongly as it did?"

Another overarching factor in the direction of oil prices is the strength of dollar.

"Prices yesterday rose in anticipation that the storm could inflict some damage on the production and refining sector, but after all was said and done we lost a little bit of production and the refineries in MS and Louisiana continued to run as Gordon made landfall", said Andrew Lipow, president of Lipow Oil Associates.

Russian Federation started raising oil output in June after the the OPEC/non-OPEC coalition agreed to ease production caps in effect since 2017. On Tuesday prices had climbed to $79.72, their highest since May. OPEC and Russian Federation, the world's largest producers, promised to boost supply a few days afterwards.

Today's WTI trading range is $67.50 - $70.50.

Rouhani said Iran has started moving its main export terminal in Kharg on the Persian Gulf to Jask in the Sea of Oman.

Even though the crude market of late has seen sporadic upward movement based largely on fear that USA sanctions against Iran and weekly US inventory draws herald a market tightening, it's hard to ignore fundamentals suggesting the reverse: and on Monday crude prices held steady as data revealed rising supplies and slowing demand.

There hasn't been much excitement in the market as investors were out due to summer holidays or Labor Day.

"I see that as a possibility as well".

FGE estimates Iran's exports will slump to below 1 million barrels a day by mid-2019, while industry consultant Energy Aspects Ltd. expects a plunge of 1.5 to 1.7 million in daily shipments by the end of this year from current levels of about 2.5 million.

In 2017, 56 percent of China's crude oil imports came from countries within OPEC, a decline from a peak of 67 percent in 2012 but still making it a significant market for OPEC and its Middle East members. Observed crude flows were the weakest since January.

US crude CLc1 was down 72 cents at $69.15. But the imports were still among the lowest this year due to a drop-off in demand from the country's smaller independent refineries.

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