Oil prices extend gains after United States sanctions against Iran

Cornelia Mascio
Agosto 8, 2018

Although not imposed as yet, China has proposed import taxes of up to 25 percent on USA crude, as well as on liquefied natural gas and coal.

"Our goal is to get the import of Iranian oil to zero", a senior United States administration official said Monday during a briefing with reporters.

Indian crude imports from Iran continued in the range of 200,000-250,000 b/d during the previous sanctions on Iran.

Jameel Ahmad, global head of currency strategy and market research at FXTM, said the escalation "is just reminding investors that their trade war concerns are going nowhere anytime soon".

The U.S. has restored sanctions against Iran as as President Donald Trump reaffirmed plans to impose more penalties on the country's oil sales in November.

French bank Societe Generale said there was now a "comfortable supply" in physical crude markets, but noted "Iran sanctions will take another one million bpd off the markets".

US investment bank Jefferies said in a note that "the Saudi and Russian production surges appear to be more limited" than expected, adding that the imminent reinstatement of USA sanctions against Iran also fed bullish sentiment.

Markets remained supported by the introduction on Tuesday of new USA sanctions against Iran, which initially target Iran's purchases of US dollars - in which oil is traded - as well as metals trading, coal, industrial software and its auto sector. U.S. West Texas Intermediate (WTI) crude futures were up 29 cents at $69.30 a barrel, down from am earlier high of $69.83. Total volume traded was about 48 per cent below the 100-day average. The global benchmark crude traded at a $5.82 premium to WTI for the same month.

Futures for September delivery lost 2.9 per cent to CNY 521.9 a barrel on the Shanghai International Energy Exchange.

USA investment bank Jefferies contributed to the analytical concerns by stating in a note that, "the Saudi and Russian production surges appear to be more limited" than expected.

A first batch of US sanctions against Iran, which shipped out nearly 3 million barrels per day (bpd) of crude in July, officially came into effect at 12:01am US Eastern time (0401 GMT) on Tuesday. If it's confirmed by the EIA data, it would be the twelfth straight week of losses. Weekly data from the American Petroleum Institute for US inventories is due later on Tuesday at 4:30 p.m. EDT, followed by the EIA's report on Wednesday morning. China has vowed to strike back again, dollar-for-dollar, on the $16 billion tranche. Beijing can't match that dollar-for-dollar because it imports significantly fewer American products than the United States does from China.

US sanctions on Iran's energy sector are set to be re-imposed after a 180-day "wind-down period" ending on November 4.

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