Official says S Arabia unable to replace Iran’s oil

Randal Sanchez
October 8, 2018

Brent crude, the global benchmark LCOc1, was down $1.07 to $83.09 per barrel at 0817 GMT.

U.S. National Security Advisor John Bolton also delivered a clear message to India about Iranian oil, commenting that it is the United States' objective that there will be no waivers from the sanctions regarding exports of Iranian oil and gas.

US West Texas Intermediate (WTI) crude futures were up 55 cents, or 0.7 percent, at $74.88 a barrel.

A US government official said the Trump administration is "in the midst of an internal process" of considering waivers for countries that are reducing imports of Iranian crude. Iran is planning to utilize the rupees, imported from India, food grains and medicines to their country.

But he also conceded that higher prices over one to two years "will incentivize" the increase production. However, Russia, which rivals the Saudis as a top global producer, does not support the US sanctions against Iran and has vowed to help Iran get around them and keep exporting oil.

Many analysts said they expected Iranian exports to drop by around 1 million barrels per day.

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The U.S. Labor Department's employment report showed that average hourly earnings increased 0.3 percent in September, while the unemployment rate fell to near a 49-year low of 3.7 percent.

The rise comes despite a November 4 deadline set by US President Donald Trump for companies to "wind down" their trade with Iran which is to face sanctions on its energy sector.

Secretary of State Mike Pompeo said in India last month that the administration would consider waivers and that some buyers of Iranian oil would take a "little bit of time" to unwind their trade with Iran. Both Organization of the Petroleum Exporting Countries (Opec) and non-Opec members have been making a production cut to lift the subdued crude prices.

Iran's Supreme Leader Ali Khamenei said Thursday his country is facing a "sensitive time" and economic problems because of the pressure from U.S. sanctions. Saudi Arabia is now pumping about 10.7 million barrels per day (bpd) and can add a further 1.3 million "if the market needs that", he said.

Oil prices are up on the week overall despite a large build in crude oil prices.

"Near-term spare capacity is effectively maxed out", said Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. However, the bulls are also keeping an eye on the potential spare capacity constraints and the slowdown in US drilling. On Wednesday, the global benchmark hit a late 2014 high of $86.74.

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