Iran still 'very important' as United States sanctions loom, says OPEC chief

Andrew Cummings
September 21, 2018

Oil prices edged lower yesterday as investors focused on deepening trade tension between the United States (U.S.) and China that is expected to dent global crude demand, but losses were limited as the market weighed potential supply tightening due to Iran sanctions.

Brent crude futures were up 98 cents a barrel to $79.03 a barrel at 1039 GMT, after hitting a high of $79.37.

U.S. West Texas Intermediate (WTI) futures CLc1 fell 20 cents or 0.3 percent, to $68.79 a barrel.

United States crude inventories rose by 1.2 million barrels to 397.1 million in the week to Sept 14, according to data released on Tuesday by the American Petroleum Institute (API).

"Iran is not only a founding member of OPEC, it's a very important member of this organization", OPEC Secretary-General Mohammed Sanusi Barkindo said.

USA sanctions affecting Iran's oil exports come into force on November 4.

US crude inventories rose by 1.2 million barrels to 397.1 million in the week to September 14, according to the American Petroleum Institute (API).

Meanwhile, ministers from Opec nations and non-Opec producers are set to meet on Sunday to discuss compliance with output policies.

Commenting on Iran's oil supply, "we believe that the full effect of the Iranian oil sanctions has yet to be seen and we feel that the next 5-6 week anticipatory phase of the official sanctions will associate with steady speculative buying interest", Jim Ritterbusch, president of Ritterbusch and Associates, told Reuters on Monday.

He didn't however address how the global oil industry immediately can replace Iranian crude supplies in an already-tight market.

Bloomberg reported on Tuesday, citing unnamed Saudi sources, the kingdom was now comfortable with prices above $80 per barrel, at least for the short-term.

On Monday, the Trump administration said it would begin to levy new tariffs of 10 percent on about $200 billion of Chinese products next Monday, with the tariffs to go up to 25 percent by the end of 2018.

Iranian crude oil exports continue to decline.

"We're seeing spare capacity globally heading toward critical levels as sanctions against Iran start biting", said Bart Melek, head of global strategy at TD Securities.

"The U.S. -China trade tension restricts oil from rising further, while optimism over Saudi and Russian Federation making up for Iran's losses is keeping prices from falling lower", Ahn Yea Ha, a commodities analyst at Kiwoom Securities Co., said by phone from Seoul.

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