Oil Prices Recover on Concerns over Iranian Crude Supplies

Oil prices edged higher on Thursday after previous session’s losses were cut short due to concerns over Iranian crude supplies, following the US reimposition of sanctions against Iran.

International benchmark Brent crude futures for October delivery climbed 0.08 percent to $72.34 per barrel, after dropping more than 3 percent on Wednesday.

US West Texas Intermediate (WTI) crude futures for the September contract last stood at $66.94 per barrel, following a decline of 3.22 percent in the earlier session.

Oil risk manager Tony Nunan said the market is supported by concerns the limits on Iran are going to cut Iranian supply and the geopolitical risk from the third biggest producer in the Organization of the Petroleum Exporting Countries (OPEC) is keeping a floor under the price.

Investors are also closely examining whether Saudi Arabia and other producers will raise output to replace possible supply losses from Iran, as the US is set to implement sanctions on the country’s oil exports from November.  

The limits on Iran which the US restored on Tuesday, is not expected to directly target Iranian oil until November, but US President Donald Trump has stated that he would like as many countries as possible to reduce their imports of the nation’s crude to zero.      

US-China Trade War

Also influencing prices’ movements was the escalating trade dispute between two of the world’s largest economies, with China planning to implement tariffs of 25 percent on additional $16 billion in imports from the US, including fuel and steel products as well as autos and medical equipment.

While the oil had been mostly immune from the trade dispute, the recent application of tariffs by China on US petroleum products does represent a step change for the energy market, which is clearly making investors concerned at the moment, according to analyst Daniel Hynes.   

The ongoing trade conflict is putting global markets on edge and investors worry any delay in the two countries would weaken demand for commodities.

China’s crude imports rebounded slightly in July after falling for two months, but were still among the lowest this year as a result of a huge decline in demand from smaller independent refineries.

Customs data showed that the world’s top crude importer took 8.48 million barrels per day (bpd) in July, rising from 8.18 million bpd generated in the prior year and 8.36 million bpd recorded in June. China also became the top foreign buyer of US crude in June, importing a record 15 million barrels that month.    

Meanwhile, the US Energy Information Administration (EIA) announced a 1.4 million barrel decline in crude supplies last week, which was less than half the 3.3 million barrel drop analysts had forecast.

Gasoline inventories hit an unexpected rise of 2.9 million barrels, contrary to analysts’ 1.7 million barrel draw.

Adding to signs of oil prices’ gains being limited was Iraq’s decision to slash the official selling price for September cargoes of Basra Light crude for its Asian customers on Thursday.

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