US Oil Prices Rise as Gulf Platforms Shut Ahead of Hurricane

George McgeeSep 06, 2018

Front-month volumes in the crude futures have risen to trade nearly 2.8 million lots of 1,000 barrels in July.

US light crude jumped $1.60 a barrel from Friday's close to a peak of $71.40, its highest since mid-July, before easing to around $70.65 by 1340 GMT.

Oil also weakened as the United States-China trade dispute raised demand worries.

OPEC crude production rose in August to the highest level this year as a recovery in Libyan output helped to offset a cut in Iranian exports due to US sanctions. There are several loopholes that Iran will look to use in order to dampen the effect of the sanctions on its production and the broader oil markets.

The wild card in all of this is the total impact of US sanctions on Iranian crude flows.

Iran's oil exports are plummeting, as refiners scramble to find alternatives ahead of a re imposition of USA sanctions in early November.

Fereydoun Barkeshli, President of both the Vienna Energy Research Group and the Iranian Association for Energy Economists has questioned the sustainability of today's oil price rally.

In August, Russia produced 11.21 million barrels of oil per day according to data mailed by Russian energy ministry to Bloomberg.

Considering the fact that the USA is looking to apply sanctions on Iran, third largest oil producer in OPEC, the sentiments of sanctions are keeping the oil supported.

U.S. West Texas Intermediate (WTI) crude CLc1 futures fell $1.15 to settle at $68.72 a barrel, a 1.65 percent loss.

But these factors alone are not enough to create a sustainable oil rally, especially with the escalating trade war between China and the US threatening demand and the dollar set to strengthen in September. The country's oil production already was down by 150,000 barrels per day, due to importers of that oil moving away from taking Iranian shipments.

As oil markets show growing global supply concern, Iraq is signaling the jitters may be overdone.

"Tropical storm Gordon made an uneventful landfall after dashing expectations that it would strengthen to a hurricane", said Stephen Brennock of oil broker PVM. The global benchmark had climbed in the previous session to $79.72 a barrel, its highest since May.

"Prices yesterday rose in anticipation that the storm could inflict some damage on the production and refining sector, but after all was said and done we lost a little bit of production and the refineries in MS and Louisiana continued to run as Gordon made landfall", said Andrew Lipow, president of Lipow Oil Associates.

The reports said: "The impact of the sanctions will not be confined to the oil industry and will weigh on all components of GDP on the expenditure side".

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