Oil up over 2% on concerns over Iran, slower USA output growth

Daily October WTI Crude Oil

Daily October WTI Crude Oil

Oil cut earlier losses and rose towards its highest level this year on Wednesday, after a drop in USA crude inventories and as the prospect of the loss of Iranian supply added to concerns over the delicate balance between consumption and production.

Brent crude, the global benchmark for oil, has been trading between $70 and $80 since April, only briefly rising above $80 in May and this week.

"As we move into 2019, a possible risk to our forecast lies in some key emerging economies, partly due to currency depreciations versus the USA dollar, raising the cost of imported energy", the agency said.

Expect a major oil price rally in November as a direct result of sanctions on Iran, not to mention a moribund Venezuelan oil production, and U.S. oil reserves falling.

The Persian country will by November 4 see a slew of countries already abandoning oil supply contracts and the rest scrambling for alternatives as crushing United States sanctions on Iran threaten to impose additional sanctions on those defying the ban on crude imports from the country.

U.S. West Texas Intermediate (WTI) crude futures were at $67.70 per barrel at 0637 GMT, up 65 cents, or 0.2 percent from their last settlement. "The fact that much higher supply is already needed from the likes of Saudi Arabia - and the low levels of spare capacity remaining - leave the global system highly vulnerable to any further significant outage".

A group of OPEC and non-OPEC producers have been voluntarily withholding supplies since January 2017 to tighten markets, but with crude prices up by more than 40 percent since then and markets significantly tighter, there has been pressure on producers to raise output. "The last couple of weeks have seen the expected squeeze on Iranian crude flows taking shape, with overall outflows down markedly", consultant JBC Energy said.

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Oil prices fell on Thursday, slipping back from four-month highs as investors focused on the risk that emerging market crises and trade disputes could dent demand even as supply tightens.

Russia, the United States and Saudi Arabia are the world's three biggest oil producers by far, meeting around a third of the world's nearly 100 million barrels per day (bpd) of daily crude consumption. "The situation should be closely watched, the right decisions should be taken".

A group of producers around OPEC and Russian Federation have been voluntarily withholding supplies since January 2017 to tighten markets, but with crude prices up by more than 40 percent since then and markets significantly tighter, there has been pressure on Russian Federation and OPEC to raise output.

Oil traders were also watching the progress of category 4 Hurricane Florence, which is expected to make landfall in the USA by Friday.

Demand from nations not in the OECD group of industrialized countries, led by China and India, is expected to rise by 1.1 million bpd to 51.6 million bpd this year and by 1.2 million bpd to 52.8 million bpd next year, the IEA said.

Prices slipped again after U.S. President Donald Trump said in a tweet that the United States was under no pressure to make a trade deal with China, Yawger said.

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