Published: Sat, July 07, 2018
Markets | By Otis Pena

Crude Oil Price Drops on Unexpected Stockpile Build

Crude Oil Price Drops on Unexpected Stockpile Build

Fuel prices were supported by news that the US was pressuring its allies not to import oil from Iran, otherwise they risk sanctions. His latest was a reminder that the United States defends many OPEC members for "very little" money. He added, "This must be a two way street".

Trump's efforts to contain spiking oil prices came amid piling pressure on the President ahead of November midterm congressional elections, in which he has to prove claims that tax cuts and federal regulations helped in boosting the economy.

Iran's OPEC governor Hossein Kazempour Ardebili said the USA ban amounted to "self harm", adding that Iran's position is that oil should not be used as a weapon or for political purposes.

Hossein Kazempour, Iran's OPEC Governor, thinks prices are rising because of Trump's tweets. Not consumers, however, who have seen in recent months prince increases at the pump, even before the summer period of high fuel consumption.

"The responsibility of paying unnecessary prices for oil by all consumers of the whole world, especially in USA gas stations, is exclusively upon your (Trump's) shoulders and the price of over $100 per barrel is yet to come", Kazempour Ardebili told Reuters.

OPEC announced that it would restore about one million barrels per day to the market, beginning this month.

West Texas Intermediate crude oil is trading for US$73.09 per barrel.

The reason why prices were soaring recently was the artificially limited supply from OPEC as well as political risk in Iran.

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USA tariffs on $34 billion in Chinese imports took effect as a deadline passed on Friday and Beijing has vowed to respond immediately in kind, setting the two world's biggest economies on a path toward a full-blown trade conflict. However, Brent slipped yet again after Saudi Arabia announced that it raised output almost by 5,00,000 barrels per day in June to curb scarcity.

In fact, increasing prices of oil crisis was originally triggered by the United States after pulling out of the nuclear deal between Tehran and the world powers, in addition to pressure piled by USA on its allies to stop purchases of oil from Iran. Oil output cuts by Opec and allies, including Russian Federation, since January 2017 have reduced a glut of crude.

Besides, the USA military reaffirmed on Jul.04 its promise to help keep oil tanker waterways in the Persian Gulf open, after Iran hinted that it might try to block the oil exports if the US continues actions to stop importing Iranian oil.

Tuesday evening the American Petroleum Institute (API) reported that crude inventories fell by 4.5 million barrels in the week ending June 29. "REDUCE PRICING NOW!" Trump wrote on Twitter.

The challenge from now on for OPEC and for oil producers is not to seek artificial price inflation, but to improve efficiency.

Brent for September settlement lost 20 cents, or 0.2 per cent, to US$78.04 a barrel on the London-based ICE Futures Europe exchange, after gaining 48 cents yesterday.

Those following oil markets will recall that cooperation between OPEC and non-member nations was formalized in late 2016 under a joint pledge to cut production by 1.8 million b/d (1.2 million b/d from OPEC and 600,000 b/d non-OPEC).

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