Physical crude market seems more relaxed than paper over Saudi tensions: Russell
18 October, 2018, 06:33 | Author: Sara Gill
While most oil analysts have attributed the sharp rise of premium crude prices since April to over $80 a barrel at least in part to the loss of Iranian exports, the US special envoy for Iran, Brian Hook, told reporters in Paris on October 15 that the market is doing fine with less Iranian oil.
Brent crude prices were trading 80 cents a barrels higher at $81.23 by 11.57 GMT.
The National Iranian Oil Company announced that Tehran is resurrecting an oil exchange it used to sell oil during a last round of global sanctions four years ago, before most sanctions were lifted under Iran's 2015 nuclear deal in exchange for curbs on Iran's nuclear activities.
Saudi Arabia is the India's second-biggest oil supplier behind Iraq and is committed to meet any shortfall that may arise due to sanctions on Iran, he said.
That build in reported U.S. oil stocks, by the Energy Information Administration (EIA), came as a surprise following reports of a draw, by the American Petroleum Institute (API).
Iranian Oil Minister Bijan Namdar Zanganeh said that the market is facing reduction in supply and no producer is able to make up for the loss.
Recent headlines reflect conventional thinking: "U.S. -Saudi Tensions Pushing Stocks Lower" and "Oil Prices Waver On U.S. -Saudi Tensions".
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It's not yet clear to what extent, if any, China will curb shipments of Iranian crude due to USA sanctions.
In relevant remarks last week, Zanganeh dismissed Saudi officials' claims that the country could compensate for a loss of Tehran's supplies in the global market after the imposition of the United States sanctions. "As Saudi Arabia increases production, spare capacity is still dropping, so you can see why the market's still sensitive to potential supply shocks".
"The pattern of trade does look as though it's going to ebb away from a focus on China to other Asian countries, and Europe", said Caroline Bain, chief commodities economist at Capital Economics. Discussions between the gulf states to restart production at two oil fields in the neutral zone have broken down, with sovereignty reportedly an issue, according to S&P Global Platts.
The report also stated that at 410 million barrels, "US crude oil inventories are at the five-year average for this time of year", the EIA said.
The breakdown of the talks is equivalent to the Saudis and Kuwaitis agreeing to cut production by 500,000 barrels a day, said Phil Flynn, senior market analyst at Price Futures Group.
Flows from Iran could drop by 2 million barrels a day, to below 1 million barrels day in November and possibly December, Energy Aspects Ltd. said in a report dated October 1.
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