Oil Gains on Saudi Assurance It Won't Flood Market

Fredrick Soto
July 21, 2018

Saudi Arabia moved on Thursday to allay fears of oversupply.

Iran traded oil and condensate for around $52 a barrel in 2017. There was no mention in the statement of Saudi June crude exports.

Earlier reports had President Donald Trump just weeks ago asking Saudi Arabia to increase oil production to make up for shortfalls in Venezuela as well as anticipated shortfalls in Iran as we close in on November when the United States sanctions against Iran take effect.

Brent oil fell 32 cents, to settle at $72.58 per barrel, previously reaching a session high of $73.79.

Meanwhile, OPEC and non-OPEC's compliance with oil output curbs declined to around 120 per cent in June from 147 per cent in May, two sources familiar with the matter told Reuters on Wednesday. The goal is to bring down oil prices-and gasoline prices-ahead of the mid-term elections in November, the same month in which the renewed US sanctions on Iran are returning.

Saudi Arabia's pledge to keep its crude production steady from June to July follows an agreement last month between Opec and its partners including Russian Federation to boost production by 1 million barrels a day. Thanks to such efforts, the company was able to reduce the share of Iranian crude oil imports to 10 percent as of last month, said a Hyundai Oilbank official. As evidence, the Kingdom will reduce crude exports next month by roughly 100,000 bpd.

US drillers this week cut five oil rigs, the most since March, according to a Baker Hughes report, with the rate of growth slowing over the past month with recent declines in crude prices.

Adeeb al-Aama said in a statement on Thursday that the kingdom's July crude oil exports will be roughly in line with last month's total, which stood at almost 500,000 barrels per day (bpd).

Japan's major oil distributors are considering halting oil imports from Iran in response to US demands, sources familiar with the plan said Thursday.

Iranian exports are already starting to fall, with shipments to Europe slumping by about 50 percent in June, according to estimates from the International Energy Agency.

"This is a market where the increase in GCC and Russian supplies has come at a time when the refinery bid is lacking", said Amrita Sen, Energy Aspects' chief oil analyst.

After pulling out from the Iran Nuclear Deal on May 8, the US President promised that not only will the US reimpose the old sanctions against Tehran but also a new series of sanctions will be stamped on Iran.

Strong crack spreads - the margin on turning crude oil into diesel, gasoline and other products - have spurred refiners to keep production high.

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