Oil benefits American sanctions against Iran, but the trade dispute weighs

SINGAPORE (Reuters) – Oil prices rose Tuesday, supported by delivery rate expectations as soon as US sanctions against Iran were to bite in November, but capped by concerns, a trade dispute in the Sino-US will drag the growth of fuel demand.

FILE PHOTO: An oil pump is seen at sunset outside of Vaudoy-en-Brie, near Paris, France April 23, 2018. REUTERS / Christian Hartmann / File Photo

Brent crude oil futures LCOc1 were at $ 72.24 per barrel at 0104 GMT, up 3 cents from their last slot.

US West Texas Intermediate (WTI) raw futures CLc1 rose 24 cents or 0.4 percent with $ 66.67 a barrel.

Traders said the prices were lifted by the expectation of a decline in supply once US sanctions against the major oil exporter Iran come into force from November.

In an attempt to prevent prices from rising due to potential reductions in supply, the United States offered 11 million barrels of crude oil Monday from the Strategic Petroleum Reserve (SPR) for delivery from October 1 to November 30.

Due to the imminent disruption of supply from Iran, French bank BNP Paribas said oil production by the Organization of the Oil-exporting Countries (OPEC), of which Iran is a member, is expected to fall on average of 32.1 million barrels per day. (bpd) in 2018 to 31.7 million bpd in 2019.

Nevertheless, traders said the overall sentiment on the oil market was cautious because of concerns about demand prospects amid trade disputes between the United States and China.

This week there must be a Chinese trade delegation in Washington to resolve the dispute, but US President Donald Trump told Reuters in an interview on Monday that he does not expect much progress and that solving the trade dispute with China "takes time."


The impact of the Iranian sanctions is not yet clear.

China has indicated that it will ignore US sanctions.

The supply restriction in Iran can also be more than compensated by production increases outside the OPEC producer cartel.

BNP Paribas said that non-OPEC output is likely to grow by 2 million bpd in 2018 and 1.9 million bpd next year.

"Depending on when the constraints of the pipeline infrastructure in the United States are lifted, the growth of the non-OPEC offering may turn out to be higher by the end of 2019 than currently assumed," said the bank.

The search for new oil has increased globally over the past two years, with a worldwide number of counts from 1,013 at the end of July 2016 to 1,664 in August 2018, according to the energy services company Baker Hughes (tmsnrt.rs/2MnSEr2).

The biggest increase was in North America, where the number of counts of the last two years increased from 491 to 1,057.

How the prices develop depends on the demand.

"We are seeing global demand for oil rising by 1.4 million barrels per day, both in 2018 and in 2019," said BNP Paribas, implying that global markets are likely to remain adequately supplied.

Reporting by Henning Gloystein; editing by Richard Pullin

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