IEA warns of oil price rise as sanctions on Iran bite

IEA warns of oil price rise as sanctions on Iran bite

Brent rose above $80 per barrel on Wednesday for the first time since May, spurred by expectations that U.S. sanctions against Iran's oil exports, which will start in November, will tighten global markets.

Oil traders were also watching the progress of category 4 Hurricane Florence, which is expected to make landfall in the U.S. by Friday.

US crude stocks fell 5.3 million barrels in the week to September 7 to 396.2 million barrels, the lowest since February 2015 and about 3 percent below the five-year average for this time of year, the US Energy Information Administration (EIA) said on Wednesday. The global benchmark earlier reached $80.13 a barrel, its highest since May 22.

A group of OPEC and non-OPEC producers have been voluntarily withholding supplies since January 2017 to tighten markets, but with crude prices up by more than 40 per cent since then and markets significantly tighter, there has been pressure on producers to raise output.

Since spring when the President Donald Trump administration said it would impose sanctions on Iran, crude traders have priced in a risk premium reflecting the supply shortages that may occur when exports from the third-largest OPEC member are cut. Furthermore, Iranian oil exports continued to decline before the USA sanctions go into effect in November to provide an additional boost to oil. South Korea says that it continues talks with the United States to see if it can obtain waiver. "This is a huge uncertainty on the market - how countries, which buy nearly 2 million barrels per day of Iranian oil, will act".

Two supertankers left Iran's oil terminal Kharg Island en route to China late on Wednesday-the first Iranian oil shipment to its single biggest oil customer in 18 days, which was the longest gap between crude-laden tankers departing for China in three years, according to tanker-tracking data compiled by Bloomberg.

"The price range for Brent of $70-$80 per barrel in place since April could be tested".

The Wall Street Journal said OPEC's total oil production climbed last month, in a sign the oil cartel is sticking with a decision to begin pumping out more barrels of crude this summer after more than a year of holding back output.

U.S. crude production is expected to rise 840,000 barrels per day (bpd) to 11.5 million bpd next year, lower than a previous expectation for a rise of 1.02 million bpd to 11.7 million bpd, the U.S. Energy Information Administration (EIA) said in a monthly report.

S&P global Platts said OPEC, in a report, indicated demand for the organization's own crude oil in September will be nearly 1 million bpd more than the level produced in August.

"Iran is increasingly becoming the preoccupation of the crude market", said consultants JBC Energy.

That month Russian Federation produced 11.247 million bpd, a post-Soviet Union record-high.

The United States and China have imposed a series of tariffs on each other's goods since May that have unnerved equity markets, while a rising USA dollar has put emerging market currencies under pressure, raising the energy bill for some of the world's largest oil importers.

"World demand will average 98.82 million bpd in 2018, a demand growth of 1.62 million bpd", said S&P.

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