Shanghai's early market win threatens oil duopoly

Sep 06, 2018, 13:57
Shanghai's early market win threatens oil duopoly

However, the ongoing trade dispute, or what can now arguably be called a trade war, will continue to impact global oil markets perhaps long after the impact of USA sanctions against Iran are factored into global oil prices.

Trade ministry officials have been trying to secure a waiver allowing the imports to continue but look increasingly unlikely to win one.

Brent futures for November settlement traded 45 cents higher at $78.09 a barrel on the ICE Futures Europe exchange at 11:05 a.m.in London.

"Robust demand but, more importantly, the disruptions of oil production from two OPEC producers (Venezuela and Angola) as well as the U.S. pulling out of the Iran nuclear agreement are the key factors for this outperformance", Justin Smirk, Research Analyst at Westpac noted.

The overall volume of the crude oil and condensate that is an ultra-light produced from the field of natural gas is estimated for 64M barrels (2.06M barrels/day), in against to the peak of 92.8M barrels (3.09Mbarrels/day).

Considering the fact that the USA is looking to apply sanctions on Iran, third largest oil producer in OPEC, the sentiments of sanctions are keeping the oil supported.

WTI is now trading at $70.6 per barrel, and Brent is trading at $8.2 per barrel premium to WTI.

With concerns growing that global spare capacity will be stretched if other producers such as Saudi Arabia pump more to make up for the loss, the oil market is revealing risks of a crunch.

Wholesaler JXTG also declined to confirm the report.

Edward Bell, analyst at Emirates NBD bank, added: "Iranian production is already showing signs of decline, falling by 150,000 bpd last month".

But global oil markets are still fairly well supplied.

For the first time in 3 weeks, 2 new oil rigs were added to U.S. oil production operations, taking the count of active oil rigs to 862.

OPEC crude production rose in August to the highest level this year as a recovery in Libyan output helped to offset a cut in Iranian exports due to USA sanctions. He forecasts an increase of as much as 30 percent in the U.S. WTI prices by the winter, with a break of the $75 per barrel level within a few weeks.

China's manufacturing activity grew at the slowest pace in more than a year in August, with export orders shrinking for a fifth month, a private survey showed on Monday.

Given that China and emerging markets more broadly are key demand growth areas for oil markets, analysts said crude prices had come under downward pressure.

OANDA's Innes said it was too early to say whether this would happen.

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