Oil rallies as Iran sanctions kick in

In the oil market the US-China trade fight weighed on prices. — Reuters pic

Saudi Arabia Reduced Oil Production in July

Benchmark U.S. crude oil lost 2 cents to $66.92 a barrel in electronic trading on the New York Mercantile Exchange.

It is not clear whether China, the biggest buyer of Iranian crude, will bow to US pressure.

Crude production declined 100,000 barrels per day to 10.8 million bpd in the week, according to the report.

Markets remained supported by the introduction on Tuesday of new United States sanctions against Iran, which initially target Iran's purchases of dollars - in which oil is traded - as well as metals trading, coal, industrial software and its automotive sector.

At 1500 GMT, October ICE Brent was trading $1.81 lower at $72.84/b, while September NYMEX crude was down $1.87 at $67.30/b.

China is the biggest and the most valued customer for Iran's oil and imports more than 650,000 barrels of oil per day from Iran. We will monitor this week's figures for another increase in inventory levels which could see oil prices move lower. There is the concern of global trade slowing down, but there's also a lot of geopolitical noise out there as well.

"We continue to expect Brent crude oil spot prices to fall towards $70 per barrel by the end of 2018, as the market appears to be fairly balanced in the coming months", said Linda Capuano, EIA Administrator.

The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning, showing that U.S. commercial crude inventories decreased by 1.4 million barrels last week, maintaining a total U.S. commercial crude inventory of 407.4 million barrels.

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Oil markets have entered a brief period of calm but a storm might be looming later this year when new US sanctions are poised to slash supplies of Iranian oil, the International Energy Agency said on Friday.

Oil prices fell sharply on Wednesday, hammered by an escalating trade dispute between the United States and China, weak Chinese import data and a smaller-than-anticipated drop in American crude stockpiles.

Crude prices have dipped in recent weeks, reflecting less worry about supplies following increased output by Russian Federation and several OPEC nations, the IEA said in its latest monthly report about the global oil market.

Europe is an important outlet for the OPEC member, and the region was taking around 600,000-700,000 b/d, or a third, of Iranian crude exports until May this year. Earlier today, crude oil sold off after it was announced that Saudi Arabia has resumed oil shipments through the Red Sea shipping line of Bab al-Mandeb over the weekend. A second tranche coming into effect on November 5 will cover Iran's oil sector.

The Energy Information Administration is scheduled to release the data on US crude stockpiles, at 10:30 AM ET on Wednesday.

Later on Friday, Baker Hughes will publish its weekly report on the U.S. oil rig count.

For the past week, crude imports averaged 7.9 million barrels a day, up by 182,000 compared with the previous week.

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