Published: Wed, October 24, 2018
Markets | By Otis Pena

United States issues warning to Russian Federation about helping Iran escape upcoming oil sanctions

United States issues warning to Russian Federation about helping Iran escape upcoming oil sanctions

Brent for December settlement fell US$3.13 to US$76.70 a barrel on the London-based ICE Futures Europe exchange.

Saudi energy minister Khalid al-Falih told Russia's TASS news agency that his country had no intention of unleashing a 1973-style oil embargo on Western consumers, but rather was focused on raising output to compensate for supply losses elsewhere, such as Iran.

"The severity of the drop is pretty striking, but in today's trading world, we have these kind of days a little more often".

Iranian oil minister says sanctions won't stop them from exporting oil.

Saudi Arabia's energy minister has used public comments over the past week to tone down the kingdom's veiled threat to use oil as a political weapon to retaliate against possible sanctions related to the Khashoggi killing.

Sell-off witnessed in stock markets continue to weigh on commodities.

"Saudi and Russian oil production is now close to its highest historical level, and the two countries have no additional capacity to produce more and replace Iran's oil", he added.

In terms of energy, Falih said: "The energy sector has witnessed excessive investment at the beginning of this decade and this is what led to disruption hence requiring OPEC's (particularly Saudi Arabia's and Russia's) intervention and firm cooperation, and we've succeeded in regaining trust in how the future of the oil industry will be".

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There has been concern that just as markets tighten with the start of the USA sanctions against Iran, Saudi Arabia could cut crude supply in retaliation for potential sanctions against it over the Khashoggi killing.

"If oil prices will go too high, it will slow down the world economy and would trigger a global recession".

"The Saudis I think will begin to tilt - they were already doing that beforehand - they'll be doing more business with China and Russian Federation", the analyst said.

The United States warned Russian Federation on Sunday about assisting any potential Iranian attempts to evade an upcoming round of U.S. sanctions against the Islamic Republic, scheduled to take effect on November 4, months after U.S. President Donald Trump withdrew America from the 2015 nuclear deal.

The Saudi minister expected demand for oil, which now stands at around 100 million bpd, to rise to 120 million bpd over the next three decades.

South Korea's crude imports from Iran fell to zero in September, data from state-run Korea National Oil Corp showed. Shipping brokerage Eastport said crude prices were "expected to decline in coming months, as rising production in the USA offsets increasing global demand".

US crude inventories were expected to have risen for the fifth straight week last week, according to a Reuters poll ahead of weekly data from the American Petroleum Institute (API) at 4:30 p.m. EDT (2030 GMT) on Tuesday, and the Energy Information Administration (EIA) report on Wednesday morning.

USA crude oil production has climbed by nearly a third since mid-2016 to around 11 million barrels per day, and rising drilling activity points to further increases.

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