Published: Fri, October 26, 2018
Finance | By Cynthia Curry

USA oil prices up after sharp drop in fuel stocks

USA oil prices up after sharp drop in fuel stocks

These gyrations reflect the proliferation of huge risks to both supply and demand: From the slump in global equity markets to signs of weakness in the global economy; from the collapse of Venezuela's oil industry to US efforts to sanction Iran's crude exports out of existence.

"This decline is similar to the drop in Iran's crude oil production that occurred when sanctions on Iran's Central Bank were imposed in 2012", it said.

Iranian net oil export revenues were estimated at $55 billion previous year, it added.

Al-Falih said plans to diversify the economy will continue, but oil and gas expansion will also remain a priority.

"We are of the view that the market in the fourth quarter could be shifting towards an oversupply situation as evidenced by rising inventories over the past few weeks", Saudi OPEC governor Adeeb Al-Aama told Reuters on Thursday. The International Energy Agency said in a recent report that cutting Iran out of the market could make maintaining global supply "very challenging."

West Texas Intermediate prices are expected to rise at a slower rate, leading to a price spread of $9 per barrel in October between the two crude oil spot prices. USA has been significantly increasing its crude oil production and exports since 2016 amid increase in crude oil prices and tightening of supply market. The contract rose 39 cents on Wednesday. "We dropped precipitously on the idea global demand is going to slow".

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Iran's concerns do not seem to be unfounded considering Iraq and Saudi Arabia have substantially increased their crude oil production in the third quarter (July-September) of the current calendar year.

The Energy Information Administration said gasoline stocks fell 4.8 million barrels (Mmbbl), to 229.3 Mmbbl last week, the lowest total in 10 months.

In a sign that supply is plentiful, industry group the American Petroleum Institute (API) said on Tuesday that USA crude stocks had risen by 9.9-million barrels - more than forecast.

OPEC spare production capacity in 2018 of about 1.6 million barrels per day will fall to 1.3 million barrels per day in 2019, down from 2.1 million barrels per day in 2017, it said.

Uncertainty over future Iranian exports remains high.

USA commercial crude stockpiles rose for a fifth consecutive week last week, increasing by 6.3 million barrels to 422.79 million barrels, the Energy Information Administration said on Wednesday.

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