Oil prices drop as escalating trade war clouds demand outlook

22 September, 2018, 11:46 | Author: Salvatore Jensen
  • Iran is a very important member of OPEC

Iran's oil exports have fallen about 35 percent since Trump announced new USA sanctions on Tehran. Earlier this month, Saudi shipments into the USA reached a four-week average of 1 million barrels a day for the first time since late 2017, according to government data.

The potential for a full-blown trade war between the USA and China could also undercut demand by reducing economic growth globally.

Brent for November settlement traded at $77.98 a barrel on the ICE Futures Europe exchange, down 11 cents. Iran's share of OPEC revenues increased to 10% in 2017 to its highest level since 1999, recovering from declines from 2012 through 2015 that resulted from sanctions targeting Iran's oil exports.

The tariffs are likely to limit economic activity in both China and the U.S. and that should lower oil demand growth as less fuel is consumed to move goods for trade.

The Organization of the Petroleum Exporting Countries (OPEC) must keep together for the sake of the global economy as the body's founding member Iran faces renewed sanction from the United States, its secretary-general Mohammed Sanusi Barkindo said on Tuesday, September 18, the Associated Press reported.

Speculation has also been swirling over whether a potential supply gap can be filled as American sanctions curb Iran's oil exports.

Russia, the world's largest oil producer, and other producers in OPEC have kept in place a supply agreement to maintain prices while at the same time providing enough oil to the market.

"Mr. Trump's attempt to prevent Iran from appearing on the global crude oil markets has allowed Russian Federation and Saudi Arabia, which would not favour low prices, to pursue hostage-taking policies in the market", Iranian OPEC governor Hossein Kazempour Ardebili said on Saturday.

U.S. oil takes a step backwards as American crude inventories continue to outstrip demand.

Refinery runs were 2.77 million bpd, a slight drop from 2.79 million bpd in the previous month, while direct use of crude oil for power generation in July went up to 580,000 bpd, compared to 468,000 bpd in June, according to the JODI figures as reported by Platts.

Brent crude futures were down 15 cents at $78.88 a barrel by 1116 GMT, having gained 1.3 per cent on Tuesday following media reports that Saudi Arabia, the world's largest oil exporter, was comfortable with prices above $80.

Elsewhere, Russia's energy minister, Alexander Novak, said on Monday that the country was ready to discuss cooperation with the United States to balance the oil market.


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