Published: Sun, August 26, 2018
Money | By Bruce West

Oil rises as China demand resumes, signs that Iran supply curbed

Oil rises as China demand resumes, signs that Iran supply curbed

Oil prices rose on Friday as USA sanctions on Iran are expected to cut significant volumes of crude from the market, although trading was muted by concerns over the unresolved trade dispute between Washington and Beijing, Reuters reports. The data is expected to show shrinking reserves of oil in the U.S. as the government continues to sell off crude oil.

The prospect of a drop in oil exports from Iran, the third-largest producer in the Organization of the Petroleum Exporting Countries, in response to new USA sanctions was also supporting the market.

Benchmark Brent crude oil LCOc1 was down 30 cents a barrel at $74.48 by 0825 GMT.

"Iranian crude exports were still near two million barrels per day in July and will likely begin to fall dramatically in August with financial sanctions taking effect". USA light crude CLc1 was 10 cents lower at $67.76.

"Investors remain cautious as Wednesday's surprise gain in USA stockpiles remained fresh in their minds", the bank said on Friday.

However, the market expected 800,000 barrels of gasoline draw.

Energy consultancy FGE says it expects this figure to drop below 1 million bpd by mid-2019.

In options activity, December 2018 puts for oil at $50 a barrel traded, though the volume was thin with just a few hundred contracts exchanged, said Bob Yawger, director of futures at Mizuho in NY.

Negative pressure on the price of oil could emerge from decisions by the office of the U.S. Trade Representative, which has scheduled hearings this week on additional trade pressure on China.

The dollar fell after Federal Reserve Chair Jerome Powell said steady rate hikes are the best way to protect the USA economic recovery.

Stephen Brennock, analyst at PVM Oil Associates, said of traders' reaction on Thursday to the latest tariffs, "Fears are rife that economic headwinds stemming from an escalation in their trade war will ultimately hurt global oil demand". Oil production will stop during the strikes.

The strength of the greenback has an inverse relationship to the price of crude oil.

Intercontinental Exchange (ICE) Brent crude speculators 3ICELCOMNET cut their net long positions in the week by 11,985 to 324,431, the lowest in more than a year.

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