Published: Sun, September 23, 2018
Finance | By Cynthia Curry

Iran's Oil Exports Rapidly Decline As Other Producers Fill The Void

Iran's Oil Exports Rapidly Decline As Other Producers Fill The Void

President Donald Trump has once again cast blame on OPEC for high oil prices, even though his own policies have helped fuel the surge. Given the Kingdom's preference for Brent prices above $80/barrel, OPEC may not increase supply unless prices remain elevated.

Before the EIA report, benchmark West Texas Intermediate (WTI) crude for October delivery traded up about 1%, at around $70.40 a barrel, and it was unchanged shortly after the report's release.

Oil prices have increased from about $50 a barrel last September to more than $70 a barrel today, with a rebalancing of supply and demand in the market as well as major weather and geopolitical events playing a part.

Last year, Iran exported a monthly average of 2.5 mb per day, including 2.1 mb/d of crude oil and 400,000 b/d of gas condensate.

It is unclear how easily other producers, such as Saudi Arabia, Iraq and Russian Federation, can compensate for lost supply.

Jason Gammel, analyst at US bank Jefferies, said he expects Saudi Arabia to try to keep the oil market adequately supplied into 2019, "but at the cost of spare capacity", a key supply buffer to prevent oil price volatility.

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"OPEC does listen to Donald Trump", said Phil Flynn, senior market analyst at The PRICE Futures Group, during an interview with FOX Business.

Two of OPEC's founding members, Iran and Venezuela, are under sanctions from Washington. Brent is close to four-year highs, trading just below $80 a barrel, as investors bet that Opec will be unable to compensate fully for the loss of oil from Iran, Opec's third-biggest producer.

The president has tweeted several times that he wants low oil prices, prodding OPEC to simply open its spigots. Gasoline stocks fell 1.7 million barrels versus forecasts for a 100,000-barrel drop.

USA sanctions on Iran are set to hit Tehran's oil sales on November 5, with S&P Global Platts Analytics forecasting that up to 1.4 million b/d of Iranian supplies will be shut-in.

With the caveat that it's quite possible to over-interpret Trump's tweets, today's action underscores the tricky oil politics facing the White House. Saudi Arabia, Russia and the United States are the world's three largest oil producers.

Saudi officials believe there is insufficient oil demand so far to justify raising Saudi output much beyond the roughly 400,000 bpd that it has pumped above its 10 million bpd target, OPEC and industry sources told Reuters. It is unclear whether producers such as Saudi Arabia, Iraq and Russian Federation can compensate for lost supply.

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