Oil edges back from big slump as Iran sanctions return to focus

Randal Sanchez
October 26, 2018

Cushing crude stocks rose to 33 million barrels on Tuesday, up nearly 1.8 million barrels from the previous week, traders said, citing a report by market intelligence firm Genscape.

Oil rose towards $77 a barrel on Wednesday after hitting a two-month low as the focus returned to looming US sanctions on oil exporter Iran, although concern about a weaker demand outlook weighed.

These gyrations reflect the proliferation of huge risks to both supply and demand: From the slump in global equity markets to signs of weakness in the global economy; from the collapse of Venezuela's oil industry to USA efforts to sanction Iran's crude exports out of existence.

Brent crude futures crude rose 57 cents to $76.74 per barrel at 1:53 pm EDT (1753 GMT) as USA equities rose amid strong corporate earnings.

"We still see Brent reaching $85 per barrel by year-end", said United States bank Morgan Stanley.

China has been Iran's biggest oil customer.

EIA said these ups and downs reflect the recent upward price movement and the possibility that crude oil prices could remain elevated while market participants assess the effects of the sanctions.

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Gasoline production decreased last week, averaging 10 million barrels per day.

Warning that such restrictions will affect the market's stability, Zanganeh said, as long as the USA targets Iran with sanctions, the volatility in the oil market will continue.

US light crude dropped $3.03, or 4.4 per cent, to $66.33 a barrel, after earlier hitting a two-month low at $65.74.

Asked about concerns of slowing economic growth in countries such as China, a major oil consumer, Al-Aama said: "Growth risks are a concern particularly in emerging countries. we are aware that oil demand responds to global macroeconomic factors and will be responding with our partners proactively". That compares with the median 3.7 million-barrel increase forecast in a Bloomberg survey.

EIA forecasts USA crude oil production will increase by 1 million barrels per day in 2019.

"I believe that our (oil) exports could continue at a suitable level and..." Also, OPEC's September output was 850,000 barrel per day above where it was in May, not including Congo, while Russia's production in September is up 390,000 barrel per day from May, according to Platts survey data.

According to the Weekly Petroleum Status Report, U.S. commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, increased by 6.3 million barrels during last week.

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