Published: Fri, August 10, 2018
Money | By Michele Stevens

Oil prices rise amidst U.S. sanctions against Iran

Oil prices rise amidst U.S. sanctions against Iran

Front-month Brent crude oil futures LCOc1 were at $74.50 per barrel at 0651 GMT, down 15 cents, or 0.2 percent, from their last close.

State-run refiner Indian Oil Corp., which had been buying US crude in the spot market, signed a term tender to purchase American oil for delivery every month between November and January, according to Finance Director Arun Kumar Sharma.

Oil prices held losses near a seven-week low as China vowed to retaliate against the United States administration's latest tariffs, raising trade tensions between the world's two biggest economies.

From November, Washington will also target Iran's petroleum sector.

The weakness was pronounced at China's independent oil refineries, known as teapots, which the market views as an indicator of real demand for the world's second biggest oil consumer, Kilduff said.

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Oil price rose today amid reports that the US restored sanctions against Iran, the world's fifth-largest oil producer. Indian Oil is still awaiting direction from its government on Iranian crude imports, Sharma said.

As recently as June, China was the top foreign buyer of USA crude, importing a record 15 million barrels that month.

Analysts estimated that Iranian production would drop further amid the restored sanctions and drive the oil price further up. This story affects the supply side of the market.

Since late 2016, the Organization of Petroleum Exporting Countries and other nations, including Russia, Kazakhstan and Mexico, have managed the oil market, giving birth to a group popularly known as OPEC+. All countries must stop importing Iranian oil by then, the State Department said in June, or face sanctions.

WTI's June to July trading range is $62.99 to $72.98.

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The ratcheting up of trade tensions between the US and China could also help oil buyers in India, the world's third-biggest crude consumer, according to Interfax's Kumar. Lee said the actual imposition of additional tariffs by the USA on Chinese products could be delayed and concerns about higher consumer prices in the US may discourage President Donald Trump's administration from imposing further tariffs.

Beyond the sanctions, the oil market was focusing on the USA market, where the American Petroleum Institute said on Tuesday that crude inventories fell by 6 million barrels in the week to August 3 to 407.2 million.

French bank Societe Generale said there was now a "comfortable supply" in physical crude markets, but noted "Iran sanctions will take another one million bpd off the markets".

They said Iranian exports were likely to drop by up to 1 million bpd by November but even that could push Brent to $85 per barrel if oil markets were hit by other disruptions in producer countries such as Libya or Venezuela.

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