Published: Sat, September 22, 2018
Business | By Pearl Harrison

Oil prices drop as escalating trade war clouds demand outlook

Oil prices drop as escalating trade war clouds demand outlook

Bloomberg reported on Tuesday, citing unnamed Saudi sources, that the kingdom was now comfortable with prices above $80 per barrel, at least for the short term. Saudi Arabia, Russia and other major producers are scheduled to meet in Algiers on Sunday to review their strategy after the group agreed to increase production in June.

"No country is allowed to take over the share of other members for production and exports of oil under any circumstance, and the Ministerial Conference has not issued any licence for such actions", Iran's oil ministry news agency SHANA quoted Kazem Gharibabadi, the permanent envoy to Vienna-based organizations, as saying.

Brent crude futures had declined 27 cents, or 0.35 percent, to $77.78 per barrel by 0054 GMT. Brent rose to a three-year high of $80.50 a barrel in May, prompting Trump to publicly complain about rising fuel prices. Saudi Arabia's share of total OPEC net oil export revenues was almost 30% in 2017, and it has remained relatively consistent since at least 1996, ranging between 28% and 34%.

Prices in NY and London both rose as much as 2.2 percent in the previous session after Saudi Arabia was said to be comfortable with higher crude prices, at least in the short term, as the market adjusts to the loss of Iranian supplies.

Tehran feels increasingly under pressure after President Donald Trump pulled out of the landmark nuclear deal between Iran and world powers in May.

China, one of the world's largest oil consumers, on Tuesday added $60 billion of US products to its import tariff list.

OPEC and non-OPEC producers Russian Federation started withholding oil supplies in 2017 to end a global glut and prop up prices.

"Things are tightening up", said the Paris-based IEA.

American oil sanctions on Iran will resume in November and already, United States allies in Asia are busy reducing their purchase of crude from Tehran. The kingdom, according to people briefed by Saudi officials, would prefer to be cautious. But they cut output slightly in July, and kept it roughly stable in August.

USA sanctions affecting Iran's petroleum sector will come into force from November 4, though many buyers have already curbed their purchases, raising questions about how the market will make up the lost supply.

Crude inventories fell 2.1 million barrels last week to 394.1 million barrels, the lowest level since February 2015, EIA data showed.

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