Published: Fri, August 10, 2018
Business | By Pearl Harrison

Oil rises as U.S. sanctions on Iran stir supply worries

Oil rises as U.S. sanctions on Iran stir supply worries

Front-month Brent crude oil futures was down $2.52, 3.4 percent, at $72.13 a barrel by 11:51 a.m. ET (1551 GMT).

It is not clear whether China, the biggest buyer of Iranian crude, will bow to USA pressure. It shipped out nearly 3 million barrels per day of crude in September, equivalent to about 3% of global demand. From November, Washington will target the petroleum sector in Iran, the No. 3 producer in the Organization of the Petroleum Exporting Countries. Iran's oil exports to India rose by more than 40,000 b/d from June to 706,452 b/d in July.

Less than a year after first oil from the U.S. was imported into India, state-owned Indian Oil Corp (IOC) has signed up to buy crude oil from the USA through a term-tender deal, a senior company official said.

Oil held a gain near $69 a barrel as USA crude inventories are seen declining.

An Iranian newspaper reported that Foreign Minister Mohammad Javad Zarif said a USA plan to reduce Iran's oil exports to zero will not succeed.

The mounting trade tension has raised concerns that global economic growth will slow, lowering demand for crude oil in the process.

The escalating trade war has rattled global markets.

"While there has been minimal impact so far on Iran's crude production ahead of renewed U.S. sanctions, Washington's move to apply the toughest ever measures on Iran could result in an even steeper reduction than. seen during the previous round of sanctions" when its exports fell by 1.2 million barrels per day said the IEA.

U.S. West Texas Intermediate (WTI) crude futures were up 29 cents at $69.30 a barrel, down from am earlier high of $69.83.

While the demand outlook was getting gloomier, supplies are likely to tighten with the introduction of USA sanctions against Iran, which from November will also include oil exports.

Anas Alhajji, an energy economist based in Dallas, Texas, told Xinhua that "Unlike the past, us weekly crude oil inventories have become extremely sensitive to imports, making short term oil prices more volatile". A second tranche coming into effect on November 5 will cover Iran's oil sector. "If worst comes to worst and 1.5-2 million bpd of Iranian disappears from the market. calculations will go out of the window and oil bears will have to brace themselves for a very rough ride", PVM Oil Associates analyst Tamas Varga told Reuters.

NIXED DEALS: Drugstore chain Rite Aid and grocer Albertsons say they have called off their merger deal, which was worth a reported $24 billion.

Gasoline stocks notched a surprise rise of 2.9 million barrels, not the 1.7 million barrel drop analysts had predicted in a Reuters poll.

Iranian crude oil loadings to China and India increased significantly in July compared to the previous month despite USA threats, a Platts survey showed.

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