Published: Fri, September 14, 2018
Business | By Tara Barton

Watch Out For Soaring Oil Prices (Podcast)

Watch Out For Soaring Oil Prices (Podcast)

Traders said this pulled wide open the discount of U.S. WTI crude versus Brent to around $10 per barrel, the biggest since June.

US sanctions on Iran's energy industry, which come into force in November, have already cut supply back to two-year lows, while falling Venezuelan output and unplanned outages elsewhere will also keep the balance between supply and demand tight, the IEA said.

Oil prices rose more than 2 percent on Tuesday as US sanctions squeezed Iranian crude exports and after USA crude oil production in 2019 was forecast to grow at a slower rate than previously expected, prompting supply concerns.

Russian Energy Minister Alexander Novak said on Tuesday that Russia and a group of producers around the Middle East dominated Organization of the Petroleum Exporting Countries (OPEC) may sign a new long-term cooperation deal at the beginning of December, the TASS news agency reported.

The falls were due to concerns of a potential slowdown in fuel demand growth because of trade disputes between the United States and China, the world's two largest oil consumers, as well as emerging market turmoil.

The Organisation of Petroleum Exporting Countries, in its monthly oil market report for September released on Wednesday, said crude oil production from Nigeria rose to 1.71 million barrels per day in August from 1.53 million bpd the previous month. On the other hand, bond king Jeffrey Gundlach sees oil heading as high $80 or $90 a barrel.

Brent crude rose more than 1% to $80.13 - the first time it has breached $80 since late May.

Both benchmarks marked their biggest single day percentage drop in nearly one month.

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The storm is expected to make landfall on the U.S. East Coast on Friday.

US companies in China are being hurt by tariffs in the growing trade war between Washington and Beijing, according to a survey, prompting US business lobbies to urge US President Donald Trump's administration to reconsider its approach.

The White House has invited Chinese officials to restart trade talks as it prepares to escalate a trade war with China with tariffs on $200 billion worth of Chinese goods.

Outside the United States, traders have been focusing on the impact of US sanctions against Iran that will target oil exports from November.

"A drawdown in crude oil inventories isn't very comforting when you're going to lose a lot of Iranian crude in a couple of weeks", said Phil Flynn, an analyst at Price Futures Group.

WTI was pushed over $70 during the previous session due to falling crude inventory and production levels.

He also warned of the impact of USA sanctions against Iran: "This is a huge uncertainty on the market - how countries, which buy nearly 2 million barrels per day of Iranian oil, will act".

Although the EIA does not publish crude production forecasts for Russia and Saudi Arabia in its short term outlook, it expects that US output will continue to exceed Russian and Saudi production for the remaining months of 2018 and through 2019.

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