Oil prices edge up amid uncertainty over fallout from Iran sanctions 

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  • Markets attempted to ascertain the potential impact of U.S. sanctions on Iran which are due to go into effect on Nov. 4.
  • Iran is the third-largest producer in the Organization of Petroleum Exporting Countries.

Oil prices inched up on Friday, with investors trying to gauge the potential impact on supply from looming U.S. sanctions on Iran’s crude exports.

The most-active Brent crude futures contract, for December, had risen 18 cents, or 0.22 percent, to $81.56 per barrel by 0126 GMT. That was close to a four-year high of $82.55 struck on Tuesday.

With the expiration of the Brent November futures contract later on Friday, the front-month contract will become the December contract.

U.S futures were up 21 cents, or 0.29 percent, at $72.33 per barrel, on track for a weekly gain.

“The market has been focusing on trading headlines on the Iran sanctions for a whole week. But views on how much OPEC and Russia can make up for the losses vary,” said Chen Kai, head of commodity research at Shenda Futures.

The sanctions kick in on Nov. 4, with Washington asking buyers of Iranian oil to cut imports to zero to force Tehran to negotiate a new nuclear agreement and to curb its influence in the Middle East.

Saudi Arabia is expected to quietly add extra oil to the market over the next couple of months to offset the drop in Iranian production, but is worried it might need to limit output next year to balance global supply and demand as the United States pumps more crude.

Two sources familiar with OPEC policy said Saudi Arabia and other producers discussed a possible production increase of about 500,000 barrels per day (bpd) among the Organization of the Petroleum Exporting Countries and non-OPEC allies.

However, ANZ said in a note on Friday that major suppliers were unlikely to offset losses due to the sanctions estimated at 1.5 million bpd.

At its 2018-peak in May, Iran exported 2.71 million bpd, nearly 3 percent of daily global crude consumption. The nation is OPEC’s third-largest producer.

Meanwhile, looming supply from the United States and stable output from Libya were dragging on oil prices, said Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA in Singapore.

Oil prices rise 1 percent ahead of US sanctions against Iran

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  • U.S. sanctions against Iran to start Nov. 4.
  • Analysts say $100 oil is possible as markets tighten.

Oil prices rose by 1 percent on Thursday, pushed up by the prospect of tighter markets due to U.S. sanctions against major crude exporter Iran, which are set to be implemented in November.

Front-month Brent crude futures were at $82.23 per barrel at 0650 GMT, up 89 cents, or 1.1 percent from their last close, and just off Tuesday’s four-year high.

U.S. West Texas Intermediate (WTI) crude futures were at $72.47 a barrel, up 90 cents, or 1.3 percent from their last settlement.

Traders said oil markets were tightening ahead of Washington’s planned sanctions on Iran’s petroleum industry from Nov. 4.

“We view that crude market risks are heavily skewed to the upside and whilst we are not explicitly forecasting Brent to rise to $100 per barrel, we see material risks of this coming to fruition,” Japanese bank Mitsubishi UFJ Financial Group said in a note to clients.

At its 2018 peak, Iran exported around 3 million barrels per day (bpd) of crude oil, equivalent to 3 percent of global consumption.

Shipping data on Thomson Reuters Eikon shows Iran’s September exports fell to around 2 million bpd as buyers around the world bow to U.S. pressure and cut imports.

The Organization of the Petroleum Exporting Countries (OPEC) has little spare capacity to make up for an expected shortfall in Iranian exports. The country is OPEC’s third-largest producer.

Oman crude spikes

Reflecting expectations of lower supply from the Middle East, Oman crude futures on the Dubai Mercantile Exchange touched their highest in four years on Wednesday, briefly jumping above $90 a barrel.

“Oil prices remain in the Bulls domain amid concern that U.S. sanctions on Iranian crude oil exports will result in much tighter physical market conditions once they take effect in November,” said Stephen Innes, head of trading for Asia/Pacific at futures brokerage OANDA in Singapore.

“Markets could still be underestimating the supply crunch from Iran sanctions,” he added.

While global oil markets tighten, supply in the United States is ample, thanks to rising output.

U.S. crude production hit a record 11.1 million bpd in the week ending Sept. 21, according to data from the Energy Information Administration (EIA) on Wednesday.

That is an increase of almost a third since mid-2016.

Commercial crude stocks rose by 1.85 million barrels, to 395.99 million barrels, the EIA data showed.

“Seasonal refinery maintenance and ongoing crude production growth is driving U.S. crude stock builds,” U.S. bank Citi said in a note.

Oil prices drop, Brent moves further away from 4-year high

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  • On Tuesday, Washington’s special envoy for Iran, Brian Hook, told a news conference at the United Nations General Assembly that the U.S. would ensure that oil markets are well supplied before sanctions on Iran are reimposed.
  • U.S. President Donald Trump also restated calls on the Organization of the Petroleum Exporting Countries to raise oil production and curb price increments.

Brent oil edged further away from a four-year high on Wednesday and U.S. crude fell, after the U.S. said it would ensure crude markets are well supplied before sanctions are re-imposed on Iran and as President Donald Trump criticized high prices.

Brent crude futures were down 43 cents, or 0.5 percent, at $81.44 a barrel by 0041 GMT, after gaining nearly 1 percent the previous session. Earlier on Tuesday, Brent hit its highest since November 2014 at $82.55 per barrel.

U.S. crude futures were down 40 cents, or 0.6 percent at $71.88 a barrel. They rose 0.3 percent on Tuesday to close at their highest level since mid-July.

However, Brent is on course for its fifth consecutive quarterly increase, the longest such stretch for the global benchmark since early 2007, when a six-quarter run led to a record-high of $147.50 a barrel.

“We will ensure prior to the reimposition of our sanctions that we have a well supplied oil market,” Washington’s special envoy for Iran, Brian Hook, told a news conference at the United Nations General Assembly.

In a speech at the UN, Trump reiterated calls on the Organization of the Petroleum Exporting Countries to pump more oil and stop raising prices.

He also accused Iran of sowing chaos and promised further sanctions on the OPEC member after restrictions on its oil exports are imposed from early November.

The so-called ‘OPEC+’ group, which includes Russia, Oman and Kazakhstan, met over the weekend to discuss a possible increase in crude output, but the group was in no rush to do so.

Mohammad Barkindo, OPEC secretary general, said in Madrid on Tuesday that OPEC and its partners should cooperate to ensure they do not “fall from one crisis to another”.

Also weighing on sentiment was an industry report showing U.S. crude stocks unexpectedly climbed last week.

Crude inventories rose by 2.9 million barrels in the week to Sept. 21 to 400 million, compared with analyst expectations for a decrease of 1.3 million barrels, the American Petroleum Institute said.

Oil near 4-yr high as producers resist output rise to offset Iran sanctions

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  • U.S. sanctions to target Iran’s oil exports from November.
  • OPEC, Russia so far resist calls to raise output.
  • High oil prices threaten emerging market growth.

Oil prices on Tuesday were within reach of four-year highs hit in the previous session, as looming U.S. sanctions against Iran and unwillingness by the Organization of the Petroleum Exporting Countries (OPEC) to raise output supported the market.

Brent crude futures were at $81.45 per barrel at 0421 GMT, up 25 cents, or 0.3 percent, and close to the intraday peak touched the previous day at $81.48, the highest level since November 2014.

U.S. West Texas Intermediate (WTI) crude futures were at $72.27 a barrel, up 19 cents, or 0.3 percent from their last settlement.

The United States from Nov. 4 will target Iran’s oil exports with sanctions, and Washington is putting pressure on governments and companies around the world to fall in line and cut purchases from Tehran.

“Iran will lose sizeable export volumes, and given OPEC+ reluctance to raise output, the market is ill-equipped to fill the supply gap,” Harry Tchilinguirian, global head of commodity markets strategy at French bank BNP Paribas, told the Reuters Global Oil Forum on Tuesday.

OPEC+ is the name given to the group of oil producers, including non-OPEC supplier Russia, that agreed to curtail output starting in 2017.

While Britain, China, France, Germany, Russia and Iran on Tuesday said they were determined to develop payment mechanisms to continue trading despite the sanctions by the United States, most analysts expect Washington’s actions to knock between 1 million and 1.5 million barrels per day (bpd) of crude oil supplies out of markets.

“We view Brent’s rally above $80 per barrel as fundamentally justified,” said Fitch Solutions in a note.

Will OPEC act?

U.S. President Donald Trump has demanded that OPEC and Russia increase their supplies to make up for the expected fall in Iranian exports. Iran is the third-largest producer in OPEC.

OPEC and Russia, however, have so far rebuffed such calls.

“Any formal decision on oil output by the producer group, barring an extraordinary meeting, will only take place at the December meeting. Thus the window period for oil prices to potentially extend gains is quite wide as Iran loses exports and OPEC+ remains on standby,” Tchilinguirian said.

Ashley Kelty, oil analyst at financial services firm Cantor Fitzgerald said crude could soon hit $90 per barrel.

“We don’t believe OPEC can actually raise output significantly in the near term, as the physical spare capacity in the system is not that high,” Kelty said.

Bank of America Merrill Lynch has lifted its average Brent price forecast for 2019 from $75 per barrel to $80, while it increased its WTI crude oil forecast by $2 to $71 per barrel.

The bank said “the Iran factor may dominate the market near-term and cause a (crude price) spike,” although it added that emerging market “demand concerns could reappear thereafter.”

Indian refiners – struggling from high crude feedstock prices and a sliding rupee – are planning to reduce oil imports in what could be a first sign that high prices are starting to hurt demand.

Despite the bullish sentiment, some traders said current prices already reflected the tighter market, and that more oil would be coming in 2019.

Commodity trading giant Vitol said on Tuesday that non-OPEC producers, especially the United States, may insert up to 2 million bpd of new crude into the market in 2019.

To reflect rising U.S. oil exports, CME Group Inc said on Monday it will launch a WTI Houston crude futures contract in the fourth quarter.

CME’s announcement comes after rival Intercontinental Exchangesaid in July it would offer a Houston crude futures contract.

Oil prices rise on tightening market, traders expect further increases

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  • U.S. crude inventories at lowest level since 2015.
  • Tighter U.S. market comes ahead of new Iran sanctions.
  • Merchants, banks say crude could spike above $90 soon.

Oil prices rose on Monday as U.S. markets tightened just weeks ahead of Washington’s plan to impose new sanctions against Iran, with major traders and banks expecting prices to rise over $90 per barrel in coming months.

Brent crude futures were at $79.82 per barrel at 0501 GMT, up by $1.02 cents, or 1.3 percent from their last close.

U.S. West Texas Intermediate (WTI) crude futures rose by 82 cents, or 1.2 percent, to $71.60 a barrel.

Amid a tightening market, U.S. commercial crude oil inventories are at their lowest level since early 2015. And while output remains around the record of 11 million barrels per day (bpd), recent subdued U.S. drilling activity points towards a slowdown.

Commodity merchants Trafigura and Mercuria said on Monday that Brent could rise to $90 per barrel by Christmas and even above $100 in early 2019 as markets tighten once U.S. sanctions against Iran are implemented from November.

J.P. Morgan expects the sanctions could lead to a loss of 1.5 million bpd, while Mercuria warned that as much as 2 million bpd could be knocked out of the market.

The Middle East dominated Organization of the Petroleum Exporting Countries (OPEC) as well as top producer Russia are discussing raising output to counter falling supply from Iran, although no decision has been made public yet.

“We expect that those OPEC countries with available spare capacity, led by Saudi Arabia, will increase output but not completely offset the drop in Iranian barrels,” said Edward Bell, commodity analyst at Emirates NBD bank.

J.P. Morgan said in its latest market outlook, published on Friday, that “a spike to $90 per barrel is likely” for oil prices in the coming months due to the Iran sanctions.

The bank said it expects Brent and WTI to average $85 and $76 per barrel, respectively, over the next six months.

Struggling with high feedstock crude prices and record lows for the rupee against the dollar, Indian refiners are preparing to cut back crude imports and instead use up commercial inventories.