Oil prices edge up on Iran sanctions, but trade tensions drag

15 August, 2018, 05:26 | Author: Brooke Harris
  • Oil steady as emerging market woes dim demand outlook

General view of Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia May 21, 2018.

Benchmark Brent crude oil was up 10 cents at $72.91 a barrel by 0930 GMT. French energy giant Total has already said it is pulling out of its multi-billion-dollar investment project in the South Pars oil field in southern Iran as a result of the renewed sanctions.

"The most compelling evidence is provided by our currency impact model".

"The equities and the US dollar are keying primarily off of the unfolding saga in Turkey and although the lira has posted a significant rebound today, the standoff between Turkey and the U.S.is showing no sign of progress", Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

"Consequently, worries over contagion are apt to increase in the process of reducing risk appetite and renewing downside pressures on oil pricing".

Iran is the third-largest producer in the Organization of the Petroleum Exporting Countries, behind Saudi Arabia and Iraq, pumping 3.65 million bpd in July, Reuters data show.

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The last time Iran was sanctioned, about half its current oil exports of some 2.4 million barrels were removed from the market.

On Monday in its monthly oil market report, OPEC announced crude production was up in July, despite sliding output in Libya and Venezuela, with the price of oil staying essentially the same in July as it was in June.

The data released by the American Petroleum Institute on Tuesday showed that crude inventories rose by 3.7 million barrels in the week to August 10 to 410.8 million, compared with analysts' expectations for a decrease of 2.5 million barrels.

"We do have a tighter fundamental picture right now than we had a year ago", said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut.

The trade dispute is also boosting the US dollar against emerging-market currencies, and oil consumers in those countries pay more for oil in their local currencies, another potential risk to demand growth.

Yet, Goldman Sachs, for example, continues to believe that the trade war won't impact the underlying bull case for commodities, including oil, and that demand will continue to be strong.

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