The Shocking Role of Iranian Sanctions in Crude Oil's Plunge

Marcus Newton
November 16, 2018

Producers need to cut about 1 million barrels a day from October production levels, Saudi Energy Minister Khalid Al-Falih said in Abu Dhabi on Monday.

Meanwhile, Brent crude for January delivery grew 0.65 dollar to close at 66.12 dollars a barrel on the London ICE Futures Exchange.

American fingerprints are all over oil's record losing streak that's plunged prices into a bear market.

In addition, the US, Russia, and Saudi Arabia also continue pumping out oil at higher production rates than normal to compensate for Iran's shortfall that has yet to come. In July, Trump called the organization a "monopoly", warning on Twitter that "gas prices are up & they are doing little to help". The group's strategy is to lower oil inventories to their five-year average.

Oil rose toward $67 a barrel on Wednesday, recouping some of the previous session's slide, on the growing prospect of OPEC and allied producers cutting output at a meeting next month to prop up the market.

"Although the oil market has reached a balance now, the forecasts for 2019 for non-OPEC supply growth indicate higher volumes outpacing the expansion in world oil demand, leading to widening excess supply in the market", OPEC said in the report. His latest attempt was when he issued a tweet on Monday calling for OPEC to drop prices even lower. OPEC and its partners are said to be discussing a deeper-than-anticipated output cut.

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Consequently, this has dampened the outlook in the medium term for oil prices.

The American Petroleum Institute said late on Wednesday that crude inventories rose by 8.8 million barrels in the week to November 9 to 440.7 million, compared with analyst expectations for an increase of 3.2 million barrels.

Rosneft, which accounts for 40 percent of Russian oil production, plans to raise its liquid hydrocarbon output further next year, to 241 million tonnes, or 4.8-4.9 million bpd, from 4.73 million bpd in the third quarter.

Iranian oil industry has been under pressure from the US efforts to isolate the country by reimposing sanctions.

OPEC and its allies are considering cutting oil output by more than the 1 million barrels a day Saudi Arabia proposed earlier this week as the group is increasingly anxious about the potential for oversupply, people familiar with the matter said. Those lower prices likely quieted Trump, but production cuts could again boost prices at the pump.

Coupled with this is the fact that the prices of crude oil are rebounding at the worldwide market for the first time since the global oil market was hit by recession and its subsequent fall in the prices of crude oil.

Other reports by MaliBehiribAe

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