Oil prices climb on global demand, United States sanctions on Iran

Daniel Fowler
July 10, 2018

Oil prices dipped on Friday as markets grew more nervous ahead of a raft of import tariffs set to be imposed later in the day by the world's two biggest economies, the United States and China, threatening global growth.

Oil benchmarks went in different directions again on Friday afternoon, with WTI trading up and Brent trading down as fears of the escalating U.S. USA crude CLc1 was down 25 cents at $73.55.

It should also be noted that for the week, WTI was on track for a loss of about 0.4 percent while Brent was down about 3 percent.

On Thursday, an executive from China's Dongming Petrochemical Group said he expected Beijing to soon impose the tariff on USA oil imports.

U.S. West Texas Intermediate crude futures ended Friday's session up 86 cents a barrel, or 1.2%, to $73.80/Bbl, Kallanish Energy reports.

The outage at the 360,000 barrels per day (bpd) Syncrude facility in Canada has contributed to a sharp reduction in the discount for USA crude versus Brent crude over the past month.

India is also facing USA pressure, and despite an official stance that it will continue buying Iranian crude, some large buyers are already winding down imports on fears their access to American bank financing will be closed if they violate the sanctions.

American oil producers may find a new friend in India as they brace for a trade war with China that could curb USA shipments. "They (Chinese importers) are not going to be intimidated, or swayed by US sanctions", he said.

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The cancellations mean South Korea will import no Iranian oil in August, the first month of zero imports since August 2012 when South Korean buyers put Iranian oil purchases on hold before getting a waiver to import limited amounts of Iran crude, Reuters added.

Tariffs would make United States oil uncompetitive in China.

FGE said the USA government may grant some waivers to allies that are particularly reliant on Iranian supplies, and that some Iranian oil would also be smuggled into markets.

Energy consultancy FGE on Friday issued a warning of looming supply shortages due to US sanctions against Iran, and because of disruptions elsewhere.

USA investment bank Jefferies said on Friday it expected “a drop in Iranian exports well in excess of 1 million bpd” due to the US sanctions.

That came after an outage at a major Canadian oil sands facility cut regional supply.

"At the same time, Venezuela can do nothing to stop its own production decline and will lose another 400,000 bpd by year-end with production going to below 1 million bpd", FGE said, adding that another 300,000 bpd of Libyan capacity was disrupted.

Saudi Arabia told the Organization of the Petroleum Exporting Countries that it increased production by nearly 500,000 barrels per day last month.

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