Published: Fri, September 21, 2018
Markets | By Otis Pena

Oil slips as trade dispute casts a shadow over demand outlook

Oil slips as trade dispute casts a shadow over demand outlook

The prospect of Russian Federation and the USA working together to achieve global supply and demand objectives is intriguing given the long-standing rivalry between the US and OPEC; but it makes sense when one considers that both the US and Russian Federation have a strong mutual ally in energy matters, namely, Saudi Arabia.

Iran remains "a very important exporter of oil", said the chief of the Organization of the Petroleum Exporting Countries.

U.S. President Donald Trump is likely to announce new tariffs on about $200 billion on Chinese imports as early as Monday, a senior administration official told Reuters on Saturday.

US sanctions affecting Iran's oil exports come into force on November 4 and many buyers have already scaled back Iranian purchases.

Trump, facing midterm elections in the United States, already has called for more oil production from Saudi Arabia and OPEC to bring down prices with limited effect.

Oil eased on Wednesday, but held near its highest level this year, as concerns that producers may fail to cover a supply shortfall once USA sanctions on Iran come into force outweighed an increase in US inventories.

The head of OPEC said Tuesday that Iran remains "a very important member" of the oil cartel, as Tehran braces for a new round of U.S. sanctions partially targeting its crude exports.

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In comments published Saturday, a senior Iranian official said that OPEC has "not much credit" left as some members are turning it into "a tool for the U.S.".

Reuters reported on September 5 that Saudi Arabia wants oil to stay between $70 and $80 a barrel to keep a balance between maximizing revenue and keeping a lid on prices until US congressional elections.

"Whether or not this (price) development was justified, it is a supply-side development and the market has reacted to it", PVM Oil Associates strategist Tamas Varga said.

US oil futures rose more than $1 a barrel on Wednesday, bolstered by a fifth weekly crude inventory drawdown and strong domestic gasoline demand, amid ongoing supply concerns over USA sanctions on Iran that come into force in November.

Oil prices rose on Monday as investors focused on the impact of USA sanctions on Iran despite assurances by Washington that Saudi Arabia, Russia and the United States could together raise output fast enough to offset falling supplies.

Also weighing on oil prices, USA drillers added two oil rigs in the week to December 1, bringing the total count up to 749, the highest since September, Baker Hughes energy services firm said on Friday.

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