USA sanctions can not cut Iran's oil sales to zero - Iran adviser

Muriel Colon
September 22, 2018

Lipow Oil Associates President Andy Lipow on how Hurricane Florence has impacted the USA oil industry.

USA 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 US sanctions on Iran that come into force in November. Benchmark Brent crude already is nearing $80 a barrel and some believe it may go even higher.

The news agency reported while Saudi Arabia had no desire to push prices higher than $80/Bbl, it may no longer be possible to avoid it. USA sanctions affecting Iran's petroleum sector are due to come into force from November 4. Barkindo said a "permanent" framework of cooperation between the 14 OPEC members and 11 non-OPEC oil states, including the world´s top producer Russian Federation, was expected in December.

Prices in NY and London both rose as much as 2.2 percent in the previous session after Saudi Arabia was said to be comfortable with higher crude prices, at least in the short term, as the market adjusts to the loss of Iranian supplies. "As countries like South Korea stop using crude from the Islamic Republic, Saudi Arabia is going to try and fill that gap and we will see less capacity in the global supply chain of crude".

OPEC members received approximately US$567 billion in net oil export revenues in 2017, up 29% from revenues in 2016, according to the US Energy Information Administration (EIA).

There are signs, however, that Saudi Arabian exports did not increase in July.

Oil futures also drew support from geopolitical risk on Tuesday.

Saudi Arabia has mentioned several times recently that they have no desire to push oil prices over $80/barrel, a move higher may be unavoidable as U.S. sanctions on Iran are set to come into effect beginning November 4th.

Russian Federation has told Israel it will take all necessary measures to protect its military personnel in Syria, the Foreign Ministry in Moscow said.

However, the country's oil exports fell to 7.12 million barrels per day (bpd) last month from 7.24 million bpd, according to figures from the Joint Organizations Data Initiative.

Elsewhere, the latest escalation in the tit-for-tat trade war between the United States and China stoked worries over global economic growth and demand for oil.

The potential for a full-blown trade war between the USA and China could also undercut demand by reducing economic growth globally.

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