Published: Mon, August 06, 2018
Finance | By Jaime Brady

Oil prices rally on expectation that inventories will drop

Oil prices rally on expectation that inventories will drop

The return of sanctions on Iran was one of the reasons why the experts raised again-for a tenth consecutive month-their oil price forecasts for WTI Crude and Brent Crude prices, which are now expected to average $67.32 a barrel and $72.87 a barrel this year, respectively.

US crude oil imports averaged 7.75 million barrels per day last week, maintaining the levels of the previous week.

Brent crude futures LCOc1 were up 32 cents at $72.71 a barrel by 10:37 a.m. EDT (1437 GMT), while US crude CLc1 futures rose 60 cents to $68.26 a barrel.

US crude loadings for South Korea have been rising since July and arrivals are expected to reach 6 million barrels in each of September and October, the highest ever, according to the sources and trade flow data on Thomson Reuters Eikon. US crude ended the week down 0.4 percent, while Brent has fallen 1.5 percent in the week so far.

"Unipec saying they won't buy US crude and China saying they won't comply with Iran sanctions are bearish", Jakob from Petromatrix said.

Traders said prices rallied early when industry information provider Genscape reported that crude inventories at the Cushing, Oklahoma, delivery hub for USA crude, dropped 1.1 million barrels since Friday, July 27.

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Russian oil output rose by 150,000 barrels per day (bpd) in July from a month earlier, to 11.21 million bpd, energy ministry data showed on Thursday.

The price jump earlier this summer had come about in large part because of President Donald Trump 's decision to pull the USA out of an worldwide agreement to curb Iran's nuclear program. Although the sanctions don't officially take effect until November, Iran is already seeing customers flee as the US imposes penalties on buyers after Trump quit a nuclear accord with the country.

Worries about the possible loss of Iranian supply are being somewhat offset by concerns that global trade tensions could slow economic growth and crimp energy demand.

Trump has turned up pressure on China for trade concessions by proposing a higher 25 percent tariff on $200 billion of Chinese imports and China has said it will retaliate. After Trump called for a 15 percent increase in tariffs on Chinese goods earlier this week, Beijing on Friday announced it was targeting $60 billion worth of USA goods in response.

United States crude inventories rose by 3.8 million barrels last week as exports declined, creating the largest increase in Gulf Coast stocks since March, the Energy Information Administration said. "This could severely dent the competitiveness of US oil and derivatives in the Chinese market", said Abhishek Kumar, senior energy analyst at Interfax Energy. Crude oil production is now expected to average 11.8 million bpd in 2019.

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