Oil Prices Climb Ahead of US Sanctions on Iran

Oil Prices Climb Ahead of US Sanctions on Iran

Oil prices rose on Tuesday as US sanctions squeezed Iranian crude exports, tightening global supply despite efforts by Washington to get other producers to increase output.

"Things are tightening up", it said.

US crude stocks fell 5.3 million barrels in the week to September 7 to 396.2 million barrels, the lowest since February 2015 and about 3 percent below the five-year average for this time of year, the US Energy Information Administration (EIA) said on Wednesday.

Since spring, when the Trump Administration said it would impose sanctions on Iran, traders have been focusing on the impact they could have on global supply. Furthermore, Iranian oil exports continued to decline before the US sanctions go into effect in November to provide an additional boost to oil.

Brent crude futures traded at $79.20 a barrel while US crude futures rose 61 cents to $69.86 a barrel.

"Markets. are expecting substantial price pressure as Iran sanctions loom", said Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA in Singapore. South Korea says that it continues talks with the United States to see if it can obtain waiver.

He also warned of the impact of U.S. sanctions against Iran: "This is a huge uncertainty on the market - how countries, which buy nearly 2 million barrels per day of Iranian oil, will act".

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Benchmark Brent crude futures rose 47 cents to $79.53 a barrel, by 1649 (GMT).

World oil consumption will top 100 million barrels per day (bpd) in the next three months, putting upward pressure on prices, although emerging market crises and trade disputes could dent this demand, the International Energy Agency said on Thursday. The IEA said crude output fell in August by 150,000 bpd from July to a 25-month low of 3.63 million bpd, while exports fell by 280,000 bpd to 1.9 million bpd, from a peak of around 2.5 million bpd in May.

"Second-largest producer Iraq boosted its output 90,000 bpd to 4.65 million bpd".

But it said rising demand could also be checked.

Although the shipment hiatus is unlikely to signal that China has been purposefully scaling back purchases to comply with USA pressure to have Iranian oil sales at zero, it could mean that Chinese refiners were looking for better terms for Iranian oil purchases, according to Bloomberg.

Chinese media Xinhua said the U.S. Energy Information Administration (EIA) forecast on Tuesday that U.S. crude oil production will average 10.7 million bpd in 2018, up from 9.4 million barrels bpd in 2017, and will average 11.5 million barrels bpd in 2019.

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