Published: Sun, October 07, 2018
Money | By Ralph Mccoy

Oil prices dip on rising USA supply, but Iran sanctions still loom

Oil prices dip on rising USA supply, but Iran sanctions still loom

However, analysts are warning prices could go up to $100 a barrel as the world's production is already stretched and Trump's sanctions on Iran's oil industry take effect in early November.

“The market mood is exceptionally bullish, with fears growing that the USA demands for an Iran oil embargo could cause a significant supply shortfall, ” said Norbert Rucker, head of macro and commodity research at Julius Baer. According to the oil minister, the United States is trying to reduce Tehran's oil revenue to zero and this has made the markets to tighten and consequently resulted in higher oil prices. The ongoing outlook for a tightening of crude markets overshadowed forecasts for a second weekly gain in US stockpiles.

West Texas Intermediate crude for November settlement was changing hands at around $75.30 per barrel in early NY trading, up from $71.80 per barrel a week earlier. Impending U.S. sanctions are scaring buyers away from Iranian cargoes, heightening concern about a worldwide supply squeeze. The contract closed down 0.1 percent Tuesday after rising to the highest close since November 24, 2014 in the previous session.

Oil prices fell on Thursday on the prospect of a production increase from Saudi Arabia and Russian Federation and on profit-taking after futures hit four-year highs in the previous session, supported by the imminent loss of Iranian supply through USA sanctions. Total volume traded was about 13% above the 100-day average.

Brent for December settlement was little changed at $84.50 on the London-based ICE Futures Europe exchange.

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A maze of crude oil pipes and valves is pictured during a tour by the Department of Energy at the Strategic Petroleum Reserve in Freeport, Texas, U.S. June 9, 2016. The startup could lead to an additional 500,000 barrels a day in production. Saudi Arabia is one of the few countries with the ability to significantly raise output.

In the USA, crude inventories are estimated to have increased 1.5 million barrels last week, according to a Bloomberg survey of 13 analysts.

USA commercial crude inventories rose by 907,000 barrels in the week to September 28, to 400.9-million barrels, the private American Petroleum Institute (API) said on Tuesday.

Due to effect delivery and payment processes, the effects of the sanctions to be imposed on Iran started to impact the market on September 20, according to information compiled from the Iranian Embargo-Turkish Straits report prepared by the Bilkent University Energy Policy Research Center (EPRC).

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