Iran's Oil Exports Are Drying Up

Technical chart showing the performance of crude oil prices

Brent crude futures had dropped 29 cents, or 0.37 percent, to $77.76 per barrel by 12.02pm.

The barrel of West Texas Intermediate marched higher toward the $70 mark during the first half of the day but reversed its course in the NA session as the latest trade headlines raised concerns over the potential negative impact of the U.S. - China trade conflict on the world oil demand.

Administration officials said on Saturday that President Donald Trump was likely to announce the new tariffs as early as Monday.

On Monday, Russia's Energy Minister Alexander Novak said that OPEC and non-OPEC members will discuss all possible supply scenarios when they meet this month in Algeria.

The change in Saudi Arabia's view on prices coincides with some intense oil diplomacy.

"As oil sanctions against Iran take effect, perhaps in combination with production problems elsewhere, maintaining global supply might be very challenging and would come at the expense of maintaining an adequate spare capacity cushion", IEA said in its monthly Oil Market Report. He added that Russian Federation was also ready to discuss cooperation with the United States to balance the oil market, but that such discussions were not being held.

More news: Hopes Korea summit will kick-start nuclear talks

While trade disputes and financial woes in some countries may affect crude demand, the IEA said supply risks are the more important issue.

Reuters reported on September 5 that Saudi Arabia wants oil to stay between $70 and $80 a barrel to keep a balance between maximising revenue and keeping a lid on prices until U.S. congressional elections.

Saudi Arabia has markedly increased oil exports to America, a sign OPEC's leading producer is responding to pressure from Trump. Meanwhile, an industry report Tuesday showed USA crude stockpiles increased 1.25 million barrels last week, defying expectations for a decline ahead of government data Wednesday.

"But there's still a big question mark over China's USA crude purchases, which fell at one point to zero, there's a risk of Chinese tariffs on U.S. crude oil", Jakob said, which could weigh as United States output continues growing.

Shale explorers added last week the most oil rigs in a month as a pipeline bottleneck in the busy U.S. Permian Basin is encouraging drilling in other areas.

Russia, the world's largest oil producer, and other producers in OPEC have kept in place a supply agreement to maintain prices while at the same time providing enough oil to the market.

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