Reliance Industries halts imports of Iranian crude ahead of US sanctions

Virginia Carson
October 18, 2018

Oil prices edged up in cautious trade on Tuesday as expectations of higher US shale output and inventories vied with worries that crude supply from the Middle East could be disrupted by looming USA sanctions on Iran and growing tensions with top exporter Saudi Arabia.

Brent crude prices were trading 80 cents a barrels higher at $81.23 by 11.57 GMT.

The rise, reported by the US Energy Information Administration was nearly triple what analysts had forecast and further eased prices, which had hit four-year highs of $86.74 earlier this month. Even after the kingdom dialed back on flows to the U.S. last year in an attempt to draw down U.S. crude inventories (a very successful attempt, I hasten to add), we have seen U.S. imports of Saudi crude rise for four consecutive months since May of this year - coinciding with the unwinding of the OPEC production cut deal.

U.S. crude stocks rose 6.5 million barrels last week, the fourth straight weekly build, as exports were down to 1.8 million barrels per day, the U.S. Energy Information Administration said, in a report analysts characterized as bearish.

Iranian Oil Minister Bijan Namdar Zanganeh said USA can not balance a market which is suffering from short supply by words and bullying, ILNA reported. Analysts added Saudi Arabia to the list of geopolitical concerns now impacting oil prices: "In a note Monday morning, Goldman Sachs, referenced "...increased geopolitical risks, driven by elevated U.S.

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The market has also been supported amid growing United States tensions with top exporter Saudi Arabia over the disappearance of Saudi journalist Jamal Khashoggi.

Mentioning Trump's plans for zero Iranian oil exports, the official said "We should see how market is reacting, everyone is anxious and Trump has failed to reassure them".

Reuters reported on October 15 that oil tankers continued to carry Iranian oil exports to China, India, Turkey, Italy, and a few other destinations earlier this month, one month ahead of the reimposition of oil sanctions.

"My frequent visits to India are indicative of the importance Saudi Arabia attaches to this great nation as a critical energy and a strategic global player", he said calling the county an "emerging superpower".

India is the world's third biggest oil consumer and importer.

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Yet, after Brent Crude hit $86 a barrel earlier this month, market participants shifted their focus toward the demand side of the equation as various worldwide organizations warned that global economic growth may be cooling and oil demand growth may be hit by high oil prices.

While there are many factors that could influence global oil prices, Saudi Arabia and other major producers will continue to act to cushion the market from oil price shocks, Falih said at the IHS CERA conference.

"What you can say beyond doubt is that it's creating lots of exotic trade flows that hadn't been in the market before", he said.

USA gasoline stockpiles fell by 2 million barrels last week, while distillate stockpiles declined by 800,000 barrels, according to the EIA.

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