Oil falls on US stocks rise, weaker economic outlook

Andrew Cummings
August 15, 2018

"With U.S. sanctions on Iran back in place all eyes have been on the impact on crude oil exports from that country", ANZ bank said yesterday.

On Friday, the International Energy Agency (IEA) warned the energy market outlook could become "far less calm" as USA -imposed oil sanctions against Iran take effect.

Oil prices steadied on Monday as trade tensions and troubled emerging markets dented the outlook for fuel demand, though USA sanctions against Iran pointed towards tighter supply ahead.

Worldwide benchmark Brent crude traded at around $72.80 on Friday morning, little changed from the previous session, while U.S. West Texas Intermediate (WTI) stood at $67.43, down around 0.3 percent. US light crude was up 90 cents at $68.10. Analysts say it has already hit several emerging market currencies, including the South African rand, Russian ruble, and Mexican peso.

Signs of slowing economic growth and lower fuel demand increases, especially in Asia's large emerging markets are weighing on the oil markets.

That is compounding worries that a deepening trade war between the United States, China and the European Union will squeeze business activity in the world's biggest economies.

Sentiment is also clouded by a darkening economic outlook which could start impacting oil demand, traders said.

Hedge funds and other money managers reduced their bullish positions in US crude futures and options in the week ending on August 7, data from the US Commodity Futures Trading Commission showed on Friday.

Increased production in Nigeria, Kuwait and the UAE more than offset the drop recorded in Libya, Iran and Saudi Arabia, according to Bloomberg.

United States energy companies last week added the most oil rigs since May, adding 10 rigs to bring the total count to 869, according to the Baker Hughes energy services firm.

But then Trump's displeasure with high oil prices and influence over Saudi Arabia has led to augmented production levels.

The main driver is expected to be upcoming United States sanctions on Iran's energy sector, which kick in come November.

"There are lots of variables in the oil market, the most important of which is Iran", said Tamas Varga, analyst at London brokerage PVM Oil Associates.

OPEC expects world oil demand to grow by 1.43 million bpd in 2019, down from 1.64 million bpd in 2018.

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