Oil is stable as sanctions counter rising supply

Singapore — Oil markets were stable on Wednesday, buoyed by falling supplies from Iran ahead of US sanctions but held in check by rising production outside oil cartel Opec.

International Brent crude oil futures were at $76 a barrel at 2.57am GMT, up 5c from their last close.

US West Texas Intermediate (WTI) crude futures were up 6c at $68.59 a barrel.

Traders said crude prices have been supported by the prospect of US sanctions against Iran, which will start to target its oil industry from November.

Bowing to pressure from Washington, many crude buyers have already reduced orders from Opec’s third-biggest producer.

Although Tehran is offering steep discounts, Iran’s August crude oil and condensate loadings are estimated at 2.06-million barrels a day, versus a peak of 3.09-million barrels a day in April, trade flows data on Thomson Reuters Eikon showed.

Another concern is crisis-struck Opec-member Venezuela, where oil exports have dropped by half since 2016 to below 1-million barrels a day.

To stem tumbling output, Venezuelan state-run oil firm PDVSA said on Tuesday it had signed a $430m investment agreement to increase production by 640,000 barrels a day at 14 oilfields, valuing the investment at $430m. However, given the country’s political and economic instability, many analysts doubted whether this investment would go through.

Rising non-Opec supply

Despite the risk of disruption especially from Opec-countries like Venezuela, Iran, Libya and Nigeria, Bank of America Merrill Lynch said global supply could climb towards year-end.

“Heading into [the fourth quarter of 2018], we expect rising non-Opec oil production as supply outages abate and greenfield projects ramp up,” the US bank said in a note to clients.

“Currently, non-Opec supply outages are at a 15-month high of 730,000bbl/day . However, nearly half of these volumes are in the process of being restored,” it said.

Adding to that will be new production in Canada, Brazil and from the US, which the bank said “should provide a substantial boost to non-Opec supplies” during the second-half of the year “taming upside pressures on Brent crude oil prices”.

Bank of America said it expected Brent prices to be in a $65 to $80 a barrel range “until Iran sanctions start to bite” in the first-half of 2019.

In the US, crude oil inventories rose by 38,000 barrels to 405.7-million barrels in the week to August 24, industry group the American Petroleum Institute (API) said on Tuesday.

Official US fuel inventory and crude production data will be published on Wednesday by the Energy Information Administration (EIA).

Reuters

Source: businesslive.co.za