Published: Wed, August 15, 2018
Money | By Ethel Goodwin

Crude oil futures rise 0.51% on global cues

Crude oil futures rise 0.51% on global cues

"While there has been minimal impact so far on Iran's crude production ahead of renewed USA sanctions, Washington's move to apply the toughest ever measures on Iran could result in an even steeper reduction than ... seen during the previous round of sanctions" when its exports fell by 1.2 million barrels per day (mbd) said the IEA.

OPEC also lowered the forecast of world oil demand growth in 2018 by 20,000 barrels per day - to 1.64 million barrels per day.

Crude oil prices are now slightly lower.

The cartel said OPEC production in July, as reported by secondary sources, rose month over month by 41,000 barrels a day to a daily average of 32.32 million barrels.

In another worrying sign, USA energy companies added the most oil rigs since May last week, pointing to indications of US output growth.

However, a revival from lower levels can not be ruled out in the next quarter as United States sanctions on Iranian oil exports are due to take effect in November that may cut two-third of its exports and in turn tighten global supply.

Crude oil prices rose more than one per cent on Friday as USA sanctions against Iran looked set to tighten supply, but futures contracts posted a weekly decline as investors anxious that global trade disputes could slow economic growth and hurt demand for energy. Meanwhile, U.S. output, which had surged to a record last month, has slowed in recent weeks.

It also highlighted another uncertainty concerning oil demand.

"If you look at pure economic figures, the impact of the tariff disputes is still quite small, perhaps 0.5 per cent of GDP growth".

World trade volume growth peaked in January at nearly 5.7 per cent year-on-year, but fell to less than 3 per cent by May, according to the Netherlands Bureau for Economic Policy Analysis. The start of the week has seen a "risk off" move across financial markets.

The EIA reported that at 414.2 million barrels, US crude oil inventories are a bit above the five-year average for the season.

"The high crude prices appear to have been taking a toll on demand", said Sukrit Vijayakar, Director of Indian oil consultancy Trifecta.

U.S. oil production from seven major shale basins was expected to rise 93,000 bpd in September to 7.52 million bpd, the U.S. Energy Information Administration (EIA) said.

Iran is the third-largest producer in the Organisation of the Petroleum Exporting Countries, behind Saudi Arabia and Iraq, pumping 3.65 million bpd in July, media data show.

Thus, in Libya, production fell by 57,000 to 0.66 million barrels per day, in Saudi Arabia - by 53,000, to 10.39 million barrels, in Venezuela - by 48,000, to 1.28 million barrels per day. Another factor to consider, the IEA said, is that trade tensions might escalate and lead to slower economic growth, in turn lowering oil demand.

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