Oil prices edge up on Iran sanctions, but trade tensions drag

Anna Jefferson
August 15, 2018

Tom Kloza, co-founder of the Oil Price Information Service, told CNBC's " Futures Now " this week that oil prices have been so volatile that a slump to $50, or even a spike above $100 could not be completely ruled out.

In a monthly report, the Organization of the Petroleum Exporting Countries said the world will need 32.05 million barrels per day (bpd) of crude from its 15 members in 2019, down 130,000 bpd from last month's forecast.

Recent import data from China, the world's biggest importer has indicated a slowdown in energy demand with oil imports showing quite a decline in numbers last month.

Oil prices dipped on Monday as trade tensions and troubled emerging markets dented the outlook for fuel demand, though US sanctions against Iran pointed towards tighter supply ahead.

"Everything is weakening, but from a pretty elevated level", said Jeff Brown, president of energy consultancy FGE.

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Markets worry the sell-off, which shows no clear signs of stopping, could spill over to other countries.

That's because the risks to oil supply stability that will increase later this year could result in higher oil prices, and thus impact demand growth.

Reports of faster supply increases from major global producers are also putting downward pressure on the market after the Organization of the Petroleum Exporting Countries (OPEC) and other oil producers led by Russian Federation agreed in June to ease production curbs to make up for lost supplies out of Libya, Venezuela and Iran.

Oil dropped as economic turbulence in Turkey and the strengthening greenback heightened concerns about global oil demand.

Trade tensions with the United States have weakened currencies in emerging markets as investors pull cash out of countries like India and China and convert it to U.S. dollars, which are still seen as a safe haven.

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US crude stocks rose by 3.7 million barrels in the week to August 10, to 410.8 million barrels, private industry group the American Petroleum Institute (API) said on Tuesday.

Crude slid as economic turbulence in Turkey and the strengthening greenback heightened concerns about global oil demand.

French energy giant Total has already said it is pulling out of its multi-billion-dollar investment project in the South Pars oil field in southern Iran as a result of the renewed sanctions.

Australia, another rich economy in the region, has also seen strong demand, importing some 370,000 bpd in July, up from an average of 333,000 bpd in the first half of the year.

Russia's production too climbed significantly in July by 150,000 bpd from a month earlier, a figure quite higher than was mutually agreed upon during a meeting of global oil producers in June. It's also some way off a record of more than 20 million bpd from April 2016.

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