Oil edges up on Iran sanctions, but US-China row mutes trading

Anna Jefferson
August 26, 2018

"Oil prices jumped overnight as inventories drew down more than expected", said William O'Loughlin, investment analyst at Australia's Rivkin Securities. China will apply 25 per cent duties on American diesel, gasoline and other petroleum products, but United States crude is excluded from the latest list of sanctions.

The strength of the greenback has an inverse relationship to the price of crude oil. Refinery utilisation rates remained unchanged last week at 98.1% of total capacity, the highest rates since 1999.

After fading into the print, WTI rebounded after API reported a bigger than expected crude draw.

A weaker US dollar makes oil, which is priced in dollars, less expensive for buyers in other currencies.

The crude oil futures prices in NY went up by 1.2% as the USA government offered 11 million barrels of oil as a part of the regular draw-down schedule.

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USA crude inventories fell by 3.2 million barrels in the week to July 20 to 407.6 million barrels, compared with analyst expectations for a decrease of 2.3 million barrels.

Futures in NY were little changed, headed for a weekly gain of about 3 percent.

Negative pressure on the price of oil could emerge from decisions by the office of the U.S. Trade Representative, which has scheduled hearings this week on additional trade pressure on China.

In spite of these bearish factors, analysts said prices were prevented from falling further because of US sanctions against Iran, which target the financial sector from August and will include petroleum exports from November.

Worldwide benchmark Brent crude oil futures were at $74.63 per barrel at 0422 GMT, down 18 cents, or 0.2 per cent, from their last close.

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"The Iran issue continues to occupy traders' minds", said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

In production, USA crude oil output rose back to 11 million barrels per day, the EIA report said. Saudi Arabia told Opec it cut supply in July, rather than increasing output as expected.

Signs of tighter supply countered concern about slowing oil demand stemming partly from the trade dispute between the United States and China, the world's two largest economies.

Official figures from the U.S. Department of Energy's Energy Information Administration are due at 10:30 a.m. EDT (1430 GMT) on Wednesday.

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