Published: Sun, October 07, 2018
Business | By Eloise Houston

Iran says oil price rise offsets USA sanctions' impact

Iran says oil price rise offsets USA sanctions' impact

Oil traders have piled into wagers that USA crude oil could surge to $100 a barrel by next year, a milestone that until recently many considered unthinkable due to record US production growth and relatively flat global demand.

"Admittedly, supply-side concerns are pushing the oil price higher, but there are now clear warning signs on the demand-side, which could yet send prices lower", said Capital Economics in a note to clients.

With crude prices soaring and many currencies in emerging markets, including India's rupee and Indonesia's rupiah declining, analysts warn that economic growth may be eroded.

Brent has risen by around 20 percent from its most recent lows in August, while the U.S. West Texas Intermediate (WTI) crude futures were up 25 cents, or 0.3 percent, at $75.55 a barrel.

The trading sentiments dampened in futures trade as participants indulged in booking profits at current levels but Brent crude trading above USD 86 dollar, capped the losses.

Still, uncertainty still exists on whether other oil producing countries could fill the gap of crude oil supply to be left by Iranian sanctions.

The recent rise in oil prices has offset the impact of the USA sanctions on Iran, a senior Iranian official said on Thursday. As the proportion of crude oil imported from non-Middle Eastern regions such as the United States has grown, the Korean government is considering abolishing the system to refund some of its taxes on imported oil when importing crude oil from non-Middle Eastern countries. The contract is on course for a gain of around 2.5 percent for the week.

Despite the rising US supply, traders said global oil markets remained tense because of the looming USA sanctions against Iran's oil exports that are scheduled to start from November 4. Total volume traded was about 10 per cent below the 100-day average.

WTI's weekly gain was about 1.3 per cent; Brent's was around 1.4 per cent.

Saudi Arabia, however, has said it can increase output by as much as 550,000 additional barrels per day over the next couple of months. Accordingly, during the January to August period of this year, Korea's imports of US crude oil rose more than five-fold to 26.87 million barrels from a year before.

In the week ended September 21, crude stockpiles had increased by 1.9 million barrels, after five consecutive weeks of declines.

US exports to all Asian countries fell 73,000 bpd to 427,000 bpd last week, while USA shipments to Europe dropped 102,000 bpd to 543,000 bpd, Kpler data showed.

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