Published: Thu, August 09, 2018
Markets | By Otis Pena

Oil drops on slowing Chinese demand, US-China trade spat

Oil drops on slowing Chinese demand, US-China trade spat

Furthermore, oil prices were dragged down by the increasing output of the Organization of the Petroleum Exporting Countries (OPEC) and Russian Federation.

Economists at Capital Economics said the sanctions would result in a downturn in Iran's economy but, as things stand, the economic impact on the rest of the Mena region shouldn't be severe.

Prices drew some support from US sanctions against Iran, introduced Tuesday in a range of sectors.

Hindustan Petroleum was said to have cancelled a crude oil shipment from Iran after its insurer refused to provide coverage for the cargo on concern about US sanctions.

It also is not clear if the State Department could allow sanction waivers, which were used in the Obama era to wean the world off of Iranian oil and avoid supply shocks. With the same trend, the average price for Oman crude oil futures contracts at the Dubai Mercantile Exchange (DME) witnessed a price drop by 0.6 per cent compared with previous month.

The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning, showing that U.S. commercial crude inventories decreased by 1.4 million barrels last week, maintaining a total U.S. commercial crude inventory of 407.4 million barrels.

An Iranian newspaper reported that Foreign Minister Mohammad Javad Zarif said a US plan to reduce Iran's oil exports to zero will not succeed. On November 5th, the United States will resume sanctions against Iran's energy-related financial transactions.

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"Crude oil prices rose as the reality of USA sanctions on Iran weighed on sentiment".

Iraqi Prime Minister Haider al-Abadi said his country opposes sanctions on Iran, but will abide by them to protect its own interests.

"With global demand remaining healthy and the global heatwave increasing oil demand, I think prices will remain well-supported in the near term", Hussein Sayed, chief market strategist at FXTM, said. "The reports that Saudi Arabia's production actually dropped in July continue to provide support for the market".

Shipments into the world's biggest importer of crude came in at 36.02 million tones last month, or 8.48 million bpd, up from 8.18 million bpd a year ago, and just up on June's 8.36 million bpd, data from the General Administration of Customs showed.

The Energy Information Administration is scheduled to release the data on US crude stockpiles, at 10:30 AM ET on Wednesday.

Traders were also scrutinizing weekly data on US crude stockpiles, which showed inventories fell by 1.4 million barrels in the week through August 3.

Front-month Brent crude oil futures was down $2.52, 3.4 percent, at $72.13 a barrel by 11:51 a.m. ET (1551 GMT). Some analysts warned that a global heat wave could also now affect oil demand.

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