US sanctions hit Iran's oil output in August

27 September, 2018, 08:31 | Author: Kathy Ellis
  • Saudi energy minister rips Trump tweet: 'I do not influence oil prices'

The Trump administration has told countries like China, India and Turkey to cut all imports of Iranian oil by November 4 when the USA re-imposes sanctions against Tehran.

"After the weekend's meeting, the voices of those who foresee $100 a barrel and compare the current backdrop to the 2007/2008 bull run are getting louder", said PVM Oil Associates strategist Tamas Varga.

"This means, in particular, provide an adequate supply and to avoid any shortage on the market", he intentionally repeated twice, while the american president Donald Trump has summoned Saturday the Opec to lower its prices".

Saudi energy minister Khalid al-Falih said at a press conference in Algiers that he did not "influence prices".

The mixed messages illustrate the narrow and hard path the administration is trying to take imposing tough sanctions on Iran's oil exports without sending prices sharply higher.

JPMorgan said United States sanctions on Iran could lead to a loss of 1.5 million barrels per day (bpd), while Mercuria warned that as much as 2 million bpd could be knocked out of the market.

Those fears have sent crude oil prices higher, with commodity traders Trafigura and Mercuria predicting prices could rise to more than $100 a barrel by early next year.

But the joint OPEC and non-OPEC ministerial committee known as the JMMC, which meets on Sunday, can still recommend a further increase in output if needed, the sources said.

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"Saudi Arabia and Russian Federation confirmed that they are not raising output-and this is bad news for President Trump as he wants a lower oil price that is good for business", said CMC Markets David Madden.

As such, production problems in some countries have pushed the oil producer's alliance to cut output further than intended, helping to boost prices. That was the highest level since November 12, 2014.

OPEC, Russia and other countries ignored US calls to increase crude oil production, sparking a Monday rally that saw Brent futures soar past the $80 mark. US light crude CLc1 settled up $1.30, or 1.8 percent, higher at $72.08.

"The conditions of the market and the production status of oil producers are not as such to allow finding an easy replacement for Iran's oil and remove it from oil markets".

Venezuela, which pumped 1.22 million b/d in August, according to the latest Platts survey of OPEC production, could see output fall to 1 million b/d in 2019, Platts Analytics forecasts.

Mercuria Energy Group co-founder Daniel Jaeggi for example has said prices could spike well over $100 because the market does not have much spare capacity to replace more than two million barrels a day that will be lost. However, analysts say that it is unlikely that the Kingdom will manage to bring this production to market quickly enough, and it will have difficulties in maintaining that level of production.

OPEC in December 2016 concluded an agreement with non-member states-including Russia-to reduce output in order to arrest sliding prices.

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