Oil prices fall as U.S.-China trade war clouds demand outlook

Anna Jefferson
September 21, 2018

OPEC and non-OPEC producers Russian Federation started withholding oil supplies in 2017 to end a global glut and prop up prices.

Benchmark Brent crude already is nearing $80 a barrel and some believe it may go even higher.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were down 4 cents, or 0.1 percent, at $69.81 a barrel after climbing 1.4 percent in the previous session.

Crude oil futures rose more than 1% Tuesday on signs OPEC would not be prepared to raise output to address shrinking supplies from Iran, and as Saudi Arabia signaled an informal target near current levels. Traders are looking for more clarity as the Organization of Petroleum Exporting Countries and its allies meet in Algiers later this week to discuss their output.

Meanwhile, oil output from seven major U.S. shale formations is expected to rise by 79,000 barrels per day to 7.6 million bpd in October, the U.S. Energy Information Administration said Monday.

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Iran is a "very important producer and exporter" of oil, the group's Secretary-General Mohammad Barkindo said at an event in the United Arab Emirates city of Fujairah.

Iran's oil exports have been falling in recent months as more buyers, including its second-largest buyer India, cut imports ahead of US sanctions that take effect in November.

Prices pared gains in post-settlement trade after data from industry group the American Petroleum Institute showed US crude inventories rose by 1.2 million barrels in the week to September 14 to 397.1 million, compared with analysts' expectations for a decrease of 2.7 million barrels. Russia, the world's largest oil producer, and other producers in OPEC have kept in place a supply agreement to maintain prices while at the same time providing enough oil to the market.

Bloomberg reported on Tuesday, citing unnamed Saudi sources, the kingdom was now comfortable with prices above $80 per barrel, at least for the short-term.

Output from Iran has hit its lowest level since July 2016 as top buyers India and China distance themselves from Tehran due to looming U.S. sanctions on November 5, according to the International Energy Agency.

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Official U.S. government data is due to be released on Wednesday.

United States oil takes a step backwards as American crude inventories continue to outstrip demand.

Beijing on Tuesday quickly added US$60 billion of USA products to its import tariff list in retaliation for President Donald Trump's planned levies on US$200 billion worth of Chinese goods.

Oil eased on Wednesday, but held near its highest level this year, as concerns that producers may fail to cover a supply shortfall once US sanctions on Iran come into force outweighed an increase in USA inventories.

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