Oil prices near $80 a barrel as concern grows over global supply

Lloyd Doyle
September 12, 2018

Oil prices eased on Wednesday, having neared its highest level this year after a drop in USA crude inventories and the prospect of the loss of Iranian supply added to concerns over the delicate balance between consumption and production. Additionally, top producer Russian Federation raised concerns about the vulnerability of the global crude market.

Crude oil prices gained traction on Tuesday and finally staged a decisive recovery with the barrel of West Texas Intermediate breaking above the $69 mark. December Brent is at $78.68, up $0.10 or +0.13%.

Shares of the state-run oil marketing companies Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL) fell more than a percent each on rising crude oil prices and sustained volatility in the Indian rupee against the U.S. dollar.

Later in the day, the API is going to publish its weekly crude oil stock report, which showed a draw of 1.2 million barrels in the previous week. Traders were looking for a flat number.

As Middle East markets tighten, Asian buyers are seeking alternative supplies, with South Korean and Japanese imports of USA crude hitting a record in September. Washington has signaled it was unwilling to grant sanction waivers even to allies such as India, while Iran has given the European Union until November 5 to come up with practical guarantees it will continue buying Iranian crude.

"The impact of the US sanctions on Iran is firmly being felt", said Tamas Varga, analyst at London brokerage PVM Oil. "The situation should be closely watched, the right decisions should be taken".

Novak said global oil markets were "fragile" due to geopolitical risk and supply disruptions.

Novak also said, "It is related to the fact that not all countries have managed to restore their market and production". Traders suggested he was referring to outages and falling production in Venezuela and Mexico.

"Russia has potential to raise production by 300,000 barrels (per day) mid-term, in addition to the level of October 2016", he said.

"Although EIA does not publish crude oil production forecasts for Russia and Saudi Arabia in STEO, EIA expects that USA crude oil production will continue to exceed Russian and Saudi Arabian crude oil production for the remaining months of 2018 and through 2019", adds Climate Depot. It is already causing fuel shortages as millions of households and businesses flee the area.

USA crude stocks fell by 8.6 million barrels in the week to September 7 to 395.9 million, the American Petroleum Institute (API) said on Tuesday.

Other reports by Iphone Fresh

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