Oil nears $70 a barrel as concern grows over global supply

Oil nears $70 a barrel as concern grows over global supply

Oil prices were up on the week, buoyed in earlier sessions by a larger-than-expected draw in US crude inventories, weakness in the USA dollar and a reported fall in USA production, Commerzbank said in a note.

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

US crude inventories fell by 5.3 million barrels in the last week, the US Energy Information Administration said on Wednesday.

USA sanctions on Iran's energy industry, which come into force in November, have already cut supply back to two-year lows, while falling Venezuelan output and unplanned outages elsewhere will also keep the balance between supply and demand tight, the IEA said. Brent crude futures were last down 23 cents on the day at $78.83 a barrel by 3pm, having touched a session peak of $79.66, the highest since late May, when the price broke above $80.

"The situation in Venezuela could deteriorate even faster, strife could return to Libya and the 53 days to November 4 will reveal more decisions taken by countries and companies with respect to Iranian oil purchases", the IEA said, referring to the day US sanctions on Iran take effect.

"Markets ... are expecting substantial price pressure as Iran sanction loom", said Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA in Singapore.

Russian energy minister Alexander Novak on Wednesday warned of the impact of US sanctions against Iran.

Russian energy minister Alexander Novak on Wednesday warned of the impact of U.S. sanctions against Iran.

Russia, the United States and Saudi Arabia are the world's three biggest oil producers by far, meeting around a third of the world's nearly 100 million barrels per day of daily crude consumption.

One factor that could weigh on long-term fuel demand is China's decision to take at least 1 million heavy duty diesel trucks off the roads by 2020, and to replace them with vehicles using alternative fuels like electric engines, liquefied natural gas or to shift transport to rail.

"Market participants are now evaluating this development in conjunction with potential for further declines in oil output from Iran and Venezuela, which portrays a significantly bullish picture on prices", said Abhishek Kumar, senior energy analyst at Interfax Energy in London.

"Crude oil production in OPEC rose month-on-month by 278,000 barrels a day in August, to 32.57 million bpd in August", the oil cartel said.

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

"Saudi Arabia, OPEC's largest producer, saw its output rise modestly to 10.40 million bpd, up 38,000 bpd from the previous month, according to secondary sources, S&P Platts reported".

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