Wednesday, 12 December, 2018

Oil up as US sanctions on Iran expected to tighten supply

Crude Oil Supply Oil rises as U.S. renew sanctions against Iran
Ginger Lawrence | 08 August, 2018, 12:49

Oil pumps are seen at sunset outside Vaudoy-en-Brie, near Paris, France April 23, 2018.

Once again, Oil prices have been perky today following yesterday's bullish market on due to the revived USA sanctions against Iran and after Saudi Arabia's production contracted.

The reimposed sanctions target Iran's us dollar purchases, metals trading, coal, industrial software and its auto sector. The sanctions did not include Iran's oil exports.

Brent crude oil futures were up by 33 cents from their previous close at $73.54 a barrel by 1401 GMT, while U.S. futures gained 57 cents to trade at $69.06 barrel.

The sanctions will remove one million barrels of Iranian oil per day from global markets, French Societe Generale estimated.

Sanctions that went into force on Tuesday target Iran's access to the US dollar, its trade in gold and other precious metals, and other financial measures tied to the national currency, the rial.

Brent futures LCOc1 rose 90 cents, or 1.2 percent, to settle at $74.65 a barrel, after hitting a session high of $74.90.

Other than the four key importers, the European Union has said it will not enforce United States sanctions which are to be imposed on Iran's oil and banking sectors on November 4.

Analysts have predicted the sanctions could put more than two million barrels per day at risk.

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WTI has resistance at $69.64 to $70.42 and support at $67.00 to $66.81.

President Donald Trump installed the first wave of sanctions Monday, targeting Iran's financial, automotive, aviation and metals sectors and threatening that the second wave will "ratchet up to yet another level" in November. All countries must stop importing Iranian oil by then, the State Department said in June, or face sanctions.

This is not about bombarding the market with oil and pushing the price into the $50s, it is about preparing the market and easing the transition, he said.

That came despite a pledge by the Saudis and top producer Russian Federation in June to raise output from July, with Saudi Arabia promising a "measurable" supply boost.

But new data released on Monday showed Saudi Arabia's oil production fell in July by 200,000 bpd from the month earlier.

Many countries, including USA allies in Europe as well as China and India, oppose the sanctions, but the US government said it wants as many countries as possible to stop buying Iranian oil.

Meanwhile, U.S. crude production, which has climbed dramatically fueled largely by increased output from shale formations, may now rise more slowly as prices drop, according to the U.S. Energy Information Administration's monthly report.

"Past instances of El Niño have resulted in sharp drops in U.S. residential and commercial heating oil demand and prices", it said.