Iran Offers Discounted Oil To Asia

15 August, 2018, 19:19 | Author: Salvatore Jensen
  • Saudi Arabia reins in oil production as demand forecasts waver

Crude futures ended slightly lower Monday despite a fall-off in Saudi Arabian production and tighter fundamentals.

"With U.S. sanctions on Iran back in place all eyes have been on the impact on crude oil exports from that country", ANZ bank said yesterday.

"There are lots of variables in the oil market, the most important of which is Iran".

Reports of faster supply increases from major global producers are also putting downward pressure on the market after the Organization of the Petroleum Exporting Countries (OPEC) and other oil producers led by Russian Federation agreed in June to ease production curbs to make up for lost supplies out of Libya, Venezuela and Iran.

In line with that, the oil cartel along with allies, including Russian Federation, agreed in June to ease production curbs and increase output by around 1 million bpd to offset for lost supplies from Iran, Venezuela, and Libya. The spread on Wednesday had almost halved from a month ago to $1.63 per barrel DUB-EFS-1M.

Moreover, Turkey's economic turmoil has raised concerns about a contagious crisis throughout emerging economies, which dented market expectations for the overall oil demand in the coming months.

The potential for a supply shortage appeared to have subsided for now, the International Energy Agency said on Friday.

Though topsy-turvy ride in crude prices is expected to continue, but overall they are likely to trade below the crucial resistance of $73 per barrel and Rs.4950 per barrel level and seem primed to tread lower.




Fresh weekly data on US commercial crude inventories on Tuesday and Wednesday to gauge the strength of demand in the world's largest oil consumer and how fast output levels will continue to rise will capture the market's attention.

Charters of super-tankers from the Middle East, on which Asia heavily relies to meet its oil demand, are dipping, according to ship brokerage Banchero Costa. The company thus becomes the first Indian refiner to buy the US oil, in a deal that happened last summer.

Chinese oil importers now appear to be shying away from buying USA crude oil as they fear Beijing may decide to add the commodity to its tariff list.

Georgi Slavov, of commodities trader Marex Spectron, said demand from oil refineries is expected to fall as profit margins tighten and the global economy appears to be producing the same output with less energy input.

Beyond the short-term complications of finding replacements for American oil, the Sino-U.S. trade dispute also poses risks to economic growth. "They're about 21 million barrels compared to numbers that are closer to 55 or 65 million barrels in the last couple of years, so you could have a squeeze between now and when the September WTI contract expires".

On top of that, truck shortages and labor shortages, as well, as pipeline capacity constraints are causing their costs to rise. Last week we downgraded our outlook for crude oil to bearish.

Prices are essentially marching to the US President Trump's actions, which are exerting a major clout over oil markets.

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