Oil slips as Opec seen able to offset impact from Iran sanctions

Anna Jefferson
May 15, 2018

"The initiation of further sanctions on Russian Federation and the withdrawal from the Iran nuclear deal are additional elements that may be a source of uncertainty in the future, impacting the US economy and global trade", the report read.

West Texas Intermediate crude for June delivery was 59 cents higher at $71.55 a barrel on the New York Mercantile Exchange as of 11:46am in London, after rising 26 cents on Monday. USA crude oil has already gained 17% year to date and 48% from a year ago. "Around a million barrels of oil a day is likely to disappear from global oil markets if the USA sanctions on Iran bite", said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

"The Oil Price Information Service [OPIS] global head of energy analysis blamed fresh geopolitical tensions for his bullish forecast - citing a potential US military response if Iran resumes its nuclear program, Venezuela's oil production nose diving and "spectacular" global demand", reports CNBC.

Meanwhile, Iran called for clarity over its nuclear deal with world powers, following US President Donald Trump's withdrawal from the 2015 pact.

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OPEC is to focus on oil inventory, rather than price.

If Descalzi's predictions proved true, this could presumably persuade Mazroui to reverse course and oblige OPEC members to pump more in order to compensate for Iran, instead of maintaining the cutbacks. Opec has an adequate "buffer" of potential production to offset barrels lost from a re-imposition of Iranian sanctions, he said in an interview with Bloomberg Television.

The cartel's projected demand growth for 2018 is now 1.65 million barrels a day, also up by 20,000 since last month's report.

SEOUL, May 15 (Reuters) - South Korea's crude oil imports from Iran fell 12.1 percent in April from a year ago, while imports of Russian oil more doubled, customs data showed on Tuesday. The previous round of sanctions cut Iran's output in half; it is unclear how much will be cut this time.

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The tightening market has just about solved the global supply overhang that has weighed down oil prices between 2014 and 2017. At the same time, the USA crude oil's discount to global benchmark Brent widened to more than $7, its deepest in five months.

Additionally, the market retreated as the U.S. Dollar strengthened against other currencies to the highest since December.

Iran now provides approximately 4 percent of global crude supplies and is the third-biggest manufacturer in the OPEC.

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