Despite Robust Production, Markets Are Vulnerable to Supply Disruptions

Despite Robust Production, Markets Are Vulnerable to Supply Disruptions

Despite Robust Production, Markets Are Vulnerable to Supply Disruptions

Oil prices rose on Tuesday amid looming U.S. sanctions against Iran's petroleum industry, despite efforts by Washington to get other major suppliers to make up for the expected disruption.

Another indication that efforts to curb Iranian oil exports are backfiring for the Trump administration is the jump in oil prices that has resulted from concerns about the USA sanctions on Iran's oil exports.

"According to Bloomberg, in case the Iran sanctions come into place, oil price could go up to $150 a barrel", reported ET.

Brent crude futures slipped 38 cents, or 0.5 percent, to $79.36 a barrel.

West Texas Intermediate crude for October settlement was changing hands at around $71.20 a barrel in early NY transactions, compared to $68.77 a barrel a week earlier.

Prices extended gains in post-settlement trade after industry data from the American Petroleum Institute showed USA crude inventories slumped 8.6 million barrels last week, versus analysts' forecasts of a 805,000-barrel decrease.

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US nationwide crude inventories may have fallen 2.25 MMbbl last week, according to a Bloomberg survey of analysts ahead of government data due to be released on Wednesday.

Further oil price increases could trigger a slowdown in domestic or global economic growth, which could further complicate the U.S.' Iran policy and Trump's domestic political situation.

The Trump administration has looked to Middle Eastern producers to pick up the slack, with Saudi Arabia agreeing earlier this year to increase oil output by a "measurable" amount.

The issue of additional United States sanctions that are being imposed on Iran was again a major subject of market attention, with Russian Energy Minister Alexander Novak warning of the impact that the the U.S. action could have on Iranian oil sales.

Oil production is down 45.8% to 1.3 million barrels per day since the end of 2015.

U.S. crude inventories fell by 5.3 million barrels in the last week, the U.S. Energy Information Administration said on Wednesday. Novak did not provide details.

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A group of Opec and non-Opec producers have been voluntarily withholding supplies since January 2017 to tighten markets, but with crude prices up by more than 40% since then and markets significantly tighter, there has been pressure on producers to raise output.

The Paris-based energy agency said falling output in Iran and Venezuela could drive up prices if it is not offset by more production elsewhere.

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"World demand will average 98.82 million bpd in 2018, a demand growth of 1.62 million bpd", said S&P.

Asian consumers of oil have begun to reduce purchases of Iranian oil and South Korea has reduced its imports Iranian crude to zero, on direct orders of the White House.

Worldwide oil benchmark, Brent crude, extended its gains on Wednesday, trading near a two-month high as shrinking oil inventories pointed to an increasingly tight global market.

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