USA oil extends gains after crude inventories fall

Devin Lawrence
August 26, 2018

A key index of the dollar versus a basket of other currencies.DXY fell on Friday, boosting the price of oil and other dollar denominated commodities.

USA sanctions against Iranian oil exports take effect on 4 November, but the impact is already starting to show.

According to EIA, U.S. crude oil production hit 11 million barrels per day which was 100,000 barrels per day higher than the previous week.

Of course, this assessment on Iran's crude oil exports for August could prove to be premature, as data is for the first half of this month only. The rebound in oil prices helped the energy supermajors print strong second-quarter results with much higher profits but weaker-than-expected cash flows. Saudi Arabia told Opec it cut supply in July, rather than increasing output as expected.

Global markets weakened as the intensifying trade spat between the United States and China was seen as a drag on economic growth.

The prospect of a drop in oil exports from Iran, the third-largest producer in the Organization of the Petroleum Exporting Countries, in response to new USA sanctions is also supporting the market.

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Iran, a member of the Organization of the Petroleum Exporting Countries (Opec) and Opec's third-largest oil producer, said earlier this week no other Opec member should be allowed to take over its share of oil exports.

However, this week, because of falling USA crude oil inventories, the price of U.S. crude has once again risen. US crude CLc1 was up 89 cents, or 1.3 percent, at $68.72. The contract dipped 3 cents to settle at $67.83 on Thursday.

Brent crude, the global benchmark, rose $1.80, or 2.5%, to $74.43 US a barrel. For this month so far, Brent is trading at a premium of $6.73 on the West Texas Intermediate.

United States commercial crude oil inventories fell by 5.8 million barrels in the week to August 17 to 408.36 million barrels, the Energy Information Administration (EIA) said on Wednesday. Workers at Total SA's North Sea oil and gas fields will go ahead with scheduled strikes after talks broke down.

Chinese ship owners are no longer accepting Iranian oil and its using its own tankers to supply oil to top U.S. customers as the impending American sanctions are expected to disrupt worldwide trade.

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