Oil rises as investors fret over Iranian supply gaps

Oil rises as investors fret over Iranian supply gaps

The West Texas Intermediate for November delivery dropped 2.17 USA dollars to settle at 69.75 dollars a barrel on the New York Mercantile Exchange, while Brent crude for December delivery lost 1.36 dollars to 80.05 dollars a barrel on the London ICE Futures Exchange. This time last week Brent was trading at $83.57 per barrel. U.S. oil prices dropped below $70 a barrel on Wednesday for the first time in four weeks.

Wittner recently upgraded his estimate of Iran oil export losses to 1.7 million barrels.

Oil prices fell on Wednesday, with USA futures settling below $70 a barrel for the first time in a month, after United States crude stockpiles rose 6.5 million barrels, nearly triple what analysts had forecast, while exports dropped.

USA inventories rose 6.49 million barrels last week, according to government data released Wednesday, more than twice the amount forecast in a Bloomberg survey.

However, while the stocks data helped encourage sellers who argue that fears about supply tightness are overblown, the controversy over the disappearance in Istanbul of prominent Saudi critic and journalist Jamal Khashoggi kept concerns about geopolitical uncertainty to the fore. Shipments are seen dropping further to less than a 1 MMbpd as everyone from shipowners to port operators and insurers turn away from the Middle East nation. As the week started, investors were focused on the ongoing tensions between the United States and Saudi Arabia.

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U.S. President Donald Trump said on Thursday that he presumes Khashoggi had likely been killed and that the U.S. response to Saudi Arabia will likely be very severe.

"The kingdom affirms its total rejection of any threats and attempts to undermine it, whether by threatening to impose economic sanctions, using political pressures, or repeating false accusations", an official statement said.

However, there is a psychological factor that contributes to keeping prices in the range of $80 and it's that a number of analysts and market dealers think OPEC member states and other oil producing countries do not have sufficient spare capacity to cater for any future increase in demand.

Iranian exports have slumped by 30%, or over 800,000 bpd, over the past six months as buyers have shunned purchases to avoid the risk of being cut off from the US financial system. However, while Iran's floating storage spiked in September, it actually fell back in October, "as several cargoes set sail for China and India, data from Kpler showed", the IEA wrote in its report. Iran has been storing a portion of its oil production on ships in the Persian Gulf, a practice that it resorted to during the previous period of global sanctions between 2012 and 2016. "With European support there will not be a problem".

Meanwhile, Saudi Arabia will quietly add extra oil to the market over the next couple of months to offset a drop in Iranian production but is anxious it might need to limit output next year to balance global supply and demand as the United States pumps more crude.

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