Oil trades below $69 as investors weigh mixed inventories report

Darnell Taylor
July 20, 2018

He stressed that the policy of Saudi Arabia is to work on satisfying customers' needs, but to do so while adhering to the OPEC agreement and the OPEC-Non-OPEC Declaration of Cooperation, adding that Saudi Arabia only exports barrels that are earmarked to match confirmed lifting requests by end users, and does not try to push oil into the market beyond its customers' needs.

It said that "While the pace of growth eases over the next five years, onshore Lower 48 crude oil production remains the key driver of global oil supply growth into the middle of next decade". In June, Saudi Arabia pumped 10.49mbpd (its OPEC limit is 10.06mbpd). Nor does Russian Federation (not an OPEC member), which has also indicated - despite the U.S. sanctions against it - that it would pump part of its excess capacity of 300,000bpd. Saudi Arabia claims that it has 2 million bpd of excess capacity-not enough to plug a major hole in the world oil market.

As for September Brent crude oil, look for a counter-trend bullish tone to develop on a sustained move over $72.94 and for the bearish tone to continue on a sustained move under $71.20. The Trump administration is considering a test sale of about 5 million barrels of oil and then releasing about 30 million barrels into the market. Deepening the oil alliance with those two regimes marks a potentially historic shift for the US that will impact people everywhere, but especially USA drivers filling up their oil tanks.

The suspension also comes amid the prospect that transaction settlements will be made hard because such major banks as MUFJ Bank and Mizuho Bank are considering halting Iran-linked businesses following the USA decision to reinstate sanctions against Tehran. Several European nations have requested a waiver from US sanctions on Iran already, which would have allowed European companies in certain strategic sectors to continue to operate in the country.

India has been preparing for alternative supplies after the US decision to reimpose sanctions on the Persian Gulf state.

Trump invites Putin to visit US
But on Tuesday, after facing harsh criticism (even from his own party) Trump seemed to backtrack on what he said. Trump is facing growing calls for impeachment after the Putin summit.

Saudi Arabia rejected concerns that it's planning to oversupply global oil markets and said it will actually trim crude exports next month. The early price action suggests that yesterday's move may have been fueled by short-covering rather than aggressive counter-trend buying in reaction to a USA government inventories report. However, gasoline stockpiles declined by 3.2 million barrels for the week and distillate stockpiles dropped by 400,000 barrels, and this pulled crude oil futures out of the red. The president has repeatedly used the social media service to accuse OPEC of artificially inflating oil prices, while demanding behind the scenes that its members boost production to replace production halted by USA sanctions on Iran.

According to the newspaper, oil supplies from Iran should be completely stopped by October. The Iranians have pinned their hopes on China, which buys most of the oil, as well as on India and Turkey.

Fuel prices were supported the last few weeks in large part because almost 700,000 bpd was shut down in Libya.

Reportedly, banks in China have already tightened restrictions on Iranian clients. However, production at one of the country's largest oil fields, Sharara, is now expected to drop again by 160,000 bpd after oil workers were abducted on Jul.14 and oil wells closed as a precaution. USA oil production continues to break records, topping 10.9 mb/d in the last few weeks, an all-time high.

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