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Supply concerns put floor under oil prices
A collision over strategy between Saudi Arabia and Iran now seems inevitable.
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OPEC’s quest to balance oil markets is about to get murkier amid Venezuela’s ongoing economic crisis and as sanctions on Iran close in. (shutterstock/-)
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nternational oil prices have staged a strong recovery since mid-August, with the ICE Brent futures contract gaining 10 percent and the WTI futures contract rising 8 percent. The rise in prices is not surprising as supply concerns have far outweighed concerns around the impact of an escalation in tariffs on global oil demand growth.
OPEC, in its August report, said that hiking tariffs could reduce 2019 oil demand by up to 350,000 b/d. S&P Global Platts Analytics, however, expects the impact of tariffs on demand to be negligible, and is maintaining its demand growth forecast at 1.8 million b/d in 2018 and 1.9 million b/d in 2019. Supply concerns are, meanwhile, rising with United States sanctions on Iran looming and global oil stocks dropping to below five-year average levels.
The International Energy Agency, in its August monthly oil report, said that OECD stocks fell 7.2 million barrels from June to 2.82 billion barrels as of end-July and were now 32 million barrels below the five-year average, marking another widening of the deficit.
Oil exports from Iran fell to their lowest level in seven months in August in the first concrete sign that the re-imposition of US sanctions in November was impacting buyer behavior.
