U.S. crude bounced back nicely and recorded its weekly gain in two months ending their longest run of weekly losses since 2015. This is primarily thanks to the tightening supply outlook on the back of looming Iranian supply shortages and a strike in the North Sea oil and gas fields amid rising U.S. oil production.
Trump has re-imposed tough economic sanctions against Iran this month and vowed to bring more damaging sanctions in November that will target Iran’s port operators, as well as its energy, shipping, and shipbuilding industries. Since Iran is OPEC’s third-largest oil producer and exports about 2.5 million barrels a day, renewed sanctions would reduce Iranian oil exports. Per some sources, Iranian tanker loadings are already down by around 700,000 barrels a day in the first half of August relative to July, which if it holds will exceed most expectations.
Workers at three oil and gas platforms operated by Total in the North Sea — Alwyn, Elgin and Dunbar — plan to go on strike on Sep 3. These fields, which account for about 45,000-50,000 barrels per day to the North Sea’s Forties and Brent crude streams, have already seen five strikes over the past month.
Further, falling U.S. rig counts and shrinking domestic crude inventories also supported the oil price. The weekly data from oil services firm Baker Hughes showed that the number of rigs fell by nine last week to 860, the biggest reduction since May 2016. Meanwhile, U.S. crude oil inventories fell by 5.8 million barrels (more than three times forecasts) for the week (ending August 17) to 408.4 million barrels, the five-year average for this time of year.
Though both China and the United States escalated trade disputes with the implementation of another round of tariffs on $16 billion worth of each other’s goods, it may not curb China’s appetite for U.S. crude. This is because China’s Unipec will resume buying U.S. crude oil in October after a two-month halt, according to Reuters.
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