Published: Mon, October 22, 2018
Money | By Ethel Goodwin

Fall in crude oil prices brings solace

Fall in crude oil prices brings solace

Crude prices fell sharply Thursday, with the US benchmark tallying a two-day drop of more than 4% following a fourth straight weekly climb in crude inventories that has seen domestic supplies swell by a total of 22 million barrels over that period.

Brent crude, on the other hand, slumped to $1.31, or 1.6 percent, at $80.10 a barrel by mid-afternoon of Wednesday, barely registering gains of $1.15 per barrel from the previous three sessions.

The price of Brent crude stands at about $84 per barrel, after having risen to $86 per barrel, as the November 5 deadline for imposition of United States sanctions against Iran's oil trade in the world comes closer, raising serious concerns in oil markets.

This is resulting in future prices far higher than the current market; futures markets for immediate delivery were worth $1.23 per pound on Friday, but are projected to be more than 10% higher a year from now.

U.S. crude stocks last week climbed to 6.5 million barrels, the fourth straight weekly build, nearly triple the amount analysts forecast, the U.S. Energy Information Administration said on Wednesday.

At one point earlier this year, Beijing was said to have agreed not to increase the amount of Iranian crude it buys, but since then the trade row between China and the United States has deepened, casting a shadow over the likelihood of China sticking to its word.

Turkey has been vocally opposed to the US sanctions on Iran and has said it will not cut trade ties with Tehran at the behest of other countries.

A coming "seasonal scale back in refinery demand... could result in oil stock builds", said an internal market report, which was circulated late Thursday within the OPEC and reviewed by The Wall Street Journal.

Oil traded near the lowest level in a month after a bigger-than-expected gain in American stockpiles overshadowed tensions between the US and Saudi Arabia over a missing critic of the kingdom.

But President Donald Trump on Wednesday gave Saudi Arabia the benefit of the doubt in the journalist's disappearance, suggesting the White House may not take additional action against Saudi Arabia.

For example, if the USA were to halt or reduce production, the implications would be big because the price increase could be high.

"We have conveyed to him that the price of crude oil is a matter of concern for our domestic economy and directly affects the common people", he said at a press briefing.

As the US sanctions on Iran's oil sales targets the Iranian state-run sector, Iranian government chose to offer oil in the stock market to permit the private sector to export the product to foil USA sanctions. "We've increased production quite significantly".

For the week, Brent crude was 1 per cent lower while WTI futures were down 3.4 per cent, putting both on track for a second consecutive weekly decline.

There have been some indications that implied India totally halting the import of Iranian crude oil. John Bolton, Trump's national security adviser, previously said the goal is to get Iran's oil exports down to "zero" by November.

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