Oil near flat as market weighs US-China trade tensions, Iran sanctions

Fredrick Soto
September 22, 2018

U.S. West Texas Intermediate (WTI) futures CLc1 fell 20 cents or 0.3 percent, to $68.79 a barrel. Speculation has also been swirling over whether a potential supply gap can be filled as American sanctions curb Iran's oil exports. "When you have major producers facing supply challenges, it's of concern" for OPEC and consumers alike, he said.

U.S. President Donald Trump announced on Monday that Washington would slap 10% tariffs on another $200 billion Chinese imports, except smart watches from Apple (NASDAQ:AAPL) and Fitbit and other consumer products including bicycle helmets and baby vehicle seats.

Data from the InterContinental Exchange showed open interest in calls that give the owner the right to buy Brent futures at $80 and $85 by next week grew by almost 45 percent on Monday and Tuesday to an equivalent of 54 million barrels of oil. On Tuesday, the global oil benchmark rose 1.3 percent on a media report that Saudi Arabia, the world's largest oil exporter, was comfortable with prices above $80, indicating the producer would not try to increase output to drive prices lower.

Saudi Arabia has mentioned several times recently that they have no desire to push oil prices over $80/barrel, a move higher may be unavoidable as U.S. sanctions on Iran are set to come into effect beginning November 4th.

The escalating trade row is raising concerns about the potential for slower growth in oil consumption, offsetting supply concerns stemming from the upcoming US sanctions on Iran over its nuclear program.

The country's oil exports fell to 7.12 million barrels per day (bpd) last month from 7.24 million bpd, according to figures from the Joint Organizations Data Imitative.

" Oil markets are in a tug of war as Iran sanctions will continue to provide near-term support, while discussions around global demand in the wake of this morning's tariffs and speculation of further OPEC supply increases should temper upside ambitions", Oanda head of trading Stephen Innes said.

Stockpiles of distillate fuels, which include diesel and heating oil, rose by 1.5 million barrels, the API data showed, compared with expectations for a 651,000-barrel gain.

"Iran is not only a founding member of OPEC, it's a very important member of this organization", OPEC Secretary-General Mohammed Sanusi Barkindo said.

Energy ministers of Saudi Arabia, a United States ally, and Russian Federation said in May they were prepared to ease output cuts to calm consumer worries about supply.

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