United States suggests wiggle room for some countries on Iran sanctions

Devin Lawrence
July 6, 2018

Oil traded near its highest in 3-1/2 years on Thursday, boosted by potential disruptions to flows from Iran and the Middle East. Brent crude futures were at US$78.12 a barrel at 1050 GMT, down 12 cents.

The cabinet affirmed the kingdom's readiness to use its spare capacity when needed to deal with any future changes in oil supply and demand rates in coordination with other producing countries.

The White House says Saudi Arabia could raise oil production to make up for any shortfall.

In June Saudi Arabia produced crude about 10.7 million barrels per day, which is more than 700,000 barrels more than a month ago.

"As far as the geopolitical posturing via twitter or official statements, I think the market is taking them in stride for now", Tchilinguirian said.

OPEC's June output was 32.32 million barrels per day (bpd), a Reuters survey showed on Monday, up 320,000 bpd from May.

Even with an increase in production by the likes of Saudi Arabia and Russian Federation, oil supply is likely to stay largely static because of falling production in Venezuela and global sanctions on Iran. Libya's oil production has fallen by 400,000 bpd after an attack on two of its biggest export terminals.

Oil prices rose on Friday on worries that United States sanctions against Iran would take away significant volumes of crude oil from world markets while oil demand worldwide increases. Keeping oil price around $70 per barrel serves both economic and political goal.

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US President Donald Trump lashed out at the Organization of the Petroleum Exporting Countries (OPEC) with a warning to stop manipulating oil markets and piled pressure on close US allies in an interview that aired on Sunday with a threat to sanction European companies that do business with Iran.

"U.S. petroleum demand growth slowed significantly to 385,000 bpd year-on-year in April, compared with a growth of more than 730,000 bpd year-on-year in Q1", Barclays bank said, adding that this was mostly due to higher fuel prices.

Saudi Arabia, which has been pumping about 10 million barrels per day, holds the largest spare capacity in the world and is the only country that can add substantial supply to the market.

On Tuesday a senior State Department official described tightening the noose on Tehran as "one of our top national security priorities". The two main importers of Iranian crude are China and India; both of whom import around 400,000 BPD now.

"Oil is already being offered on the bourse, about 60,000 barrels per day, but that has been only for exports of oil products", Jahangiri said.

The world's biggest crude exporter is preparing to ramp up oil production, possibly by as much as two million barrels per day, amid United States sanctions on Iran.

South Korea accounted for 14 percent of Iran's oil exports previous year, according to the US Energy Department.

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