Commodities - Oil Prices Firm on Rising US Crude

Devin Lawrence
August 10, 2018

Benchmark U.S. crude oil lost 2 cents to $66.92 a barrel in electronic trading on the New York Mercantile Exchange.

"There is room for [prices in] the crude market to soften a bit more", says John Woods of JJ Woods Associates, adding that inventories could rise further as refineries head toward maintenance season after the summer driving season.

It is not clear whether China, the biggest buyer of Iranian crude, will bow to US pressure.

Crude oil futures for September delivery ended up $0.16, or 0.2% at $69.17 a barrel.

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Prices of the barrel of the American reference for the sweet light crude oil are falling further today, breaking below the $68.00 mark per barrel.

"It's certainly going to impact on movement between the US and China, making it less efficient, meaning pressure on prices here", said Andrew Lipow, president of Lipow Oil Associates.

Traders were also scrutinizing weekly data on US crude stockpiles, which showed inventories fell by 1.4 million barrels in the week through August 3.

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West Texas Intermediate rose 52 cents to $69.01 and Brent climbed 54 cents to settle at $73.75 per barrel, on the strength of two sources at the Organization of the Petroleum Exporting Countries (OPEC) telling media that the Saudis pumped about 10.29 million bpd of crude last month, down 200,000 bpd from June.

Crude oil prices extended gains Tuesday as the Trump administration's sanctions against Tehran kicked in, setting the stage for a drop-off in production from the world's fifth-largest producer.

Oil prices rose Tuesday with the global benchmark crude, Brent soaring above $74 per barrel as the United States revived sanctions against Iran, a major producer, tightening supply to the worldwide market.

The US government introduced a raft of new sanctions against Iran on Tuesday, targeting Iran's purchases of US dollars - in which oil is traded - metals trading, coal, industrial software and its auto sector. The next stop for crude oil can be $70.35 and $71.10.

"Oil had been largely immune from the escalating trade dispute, however the recent application of tariffs by China on United States petroleum products does represent a step change for the energy market", said Daniel Hynes, a Sydney-based analyst at Australia & New Zealand Banking Group Ltd.

"As we go more towards the fourth quarter, that's when we really see the risk of prices going well into the 80s and potentially even into the 90s but very critical is how much Iranian production we lose", CNBC quoted Amrita Sen, chief oil analyst at Energy Aspects, as saying.

A spokesman for US Central Command, Bill Urban, said Washington and its allies provided security in the region and would not stand idly by.

The Energy Information Administration is scheduled to release the data on USA crude stockpiles, at 10:30 AM ET on Wednesday. Analysts polled by Reuters had forecast a 1.7 million-barrel draw in gasoline stocks USOILG=ECI. The buildup was mainly due to 9.6 million barrels of lower exports for the week ending July 27, compared with the previous weekly report levels.

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