Published: Sat, September 22, 2018
Finance | By Cynthia Curry

Oil hovers near $80, supply concern expected to underpin prices

Oil hovers near $80, supply concern expected to underpin prices

Refineries in the U.S. consumed about 17.7-million barrels a day of crude oil last week while China's refiners used about 11.8-million barrels a day in August, according to government data from the countries, the most among the world's countries.

Oil traded near $69 a barrel on signs of increased drilling by American producers and investor optimism that Saudi Arabia and Russian Federation will fill in potential supply losses from Iran.

"But there's still a big question mark over China's USA crude purchases, which fell at one point to zero, there's a risk of Chinese tariffs on U.S. crude oil", Jakob said, which could weigh as United States output continues growing.

OPEC and non-OPEC compliance with the Vienna Agreement production ceiling slipped to 97 percent in July as large producers relaxed output constraints amid falling production in crisis-hit Venezuela and expectations that Iran may be prevented from exporting oil to large parts of the globe.

China, one of the world's largest oil consumers, on Tuesday added $60 billion of US products to its import tariff list. USA sanctions affecting Iran's petroleum sector are due to come into force from November 4.

The upcoming deadline for US sanctions on Iranian oil and gas exports to come into effect in November could prove a challenge to global supply stability and reserves, particularly if there are any other significant outages in the system at the same time, according to the IEA.

Russia's Energy Minister Alexander Novak
Russia's Energy Minister Alexander Novak

Brent crude oil was up 70 cents a barrel at $78.79 by 1345 GMT.

U.S. crude inventories rose by 1.2 million barrels to 397.1 million in the week to Sept 14, according to data released on Tuesday by the American Petroleum Institute (API).

Shale explorers added last week the most oil rigs in a month as a pipeline bottleneck in the busy U.S. Permian Basin is encouraging drilling in other areas.

Since spring when the Trump administration said it would impose the sanctions, crude traders have priced in a risk premium reflecting the supply shortages that may occur when exports from Iran, the third-largest OPEC producer, are cut.

The longer-term outlook remains weighed down, however, by an escalation in the China-U.S. trade war that has clouded the outlook for crude demand.

US President Donald Trump called for OPEC members, primarily US ally Saudi Arabia, to raise their production, and warned importers to stop buying oil from Iran or face American sanctions.

Pakistan court suspends prison sentence, frees ex-PM Sharif
They were earlier sentenced to 10, seven and one year respectively in the case on July 6 by the Islamabad Accountability Court. They reached Noor Khan Airbase amid stringent security from where they will leave for Lahore via a special plane.

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