Oil prices mixed as producers release more supply in the market

20 Julio, 2018, 10:51 | Author: Arnold Perez
  • Media: Japan halts imports of oil from Iran

The Trump administration has said that it wants purchases of Iranian oil to come to zero by November 4, 2018. If prices rise as a effect of the drawdown of purchases from Iran, it will have an impact on the polls.

India has been preparing for alternative supplies after the USA decision to reimpose sanctions on the Persian Gulf state. The early price action suggests that yesterday's move may have been fueled by short-covering rather than aggressive counter-trend buying in reaction to a USA government inventories report.

LONDON-Oil prices fell Thursday morning on the back of rising USA petroleum stockpiles. This is why the United States government is pushing for at least three means to keep prices reasonably low. The government now holds about 660 million barrels in its underground tanks in Louisiana and Texas.

Underinvestment in the oil industry as well as new tensions in Libya further weaken confidence that oil prices can be held at a reasonable level.

USA crude stocks rose by 5.8 million barrels last week, compared with a forecast of a decline of 3.6 million barrels.

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Indian Oil, the South Asian nation's biggest refiner, is working on possibilities of entering into term contracts for United States volumes, instead of the current practice of purchasing from the spot market, Chairman Sanjiv Singh said in an interview. The Trump administration is considering a test sale of about 5 million barrels of oil and then releasing about 30 million barrels into the market.

"If this happens, (it) means Trump is asking Saudi Arabia to walk (away) from OPEC", he told Reuters. The Kingdom, suffering its own economic crisis, is nonetheless willing to cut off its nose to spite its face.

Last month, the White House said in a statement that Saudi Arabia's King Salman bin Abdulaziz Al Saud had promised Trump that he could raise oil production if needed, and that the country had two million bpd of spare capacity. Alternative suppliers include Saudi Arabia and the United Arab Emirates. Nor does Russian Federation (not an OPEC member), which has also indicated - despite the USA sanctions against it - that it would pump part of its excess capacity of 300,000bpd. If oil prices rise and if there is pressure on impoverished states to cut oil subsidies, the kind of protests that took place in Haiti recently should be expected. A fifth of the world's oil passes through the Straits of Hormuz, nearly half of the oil brought to the surface in West Asia. Iran points to the 1958 Geneva Convention on the Law of the Sea, whose Article 16 says that coastal states might "take the necessary steps in its territorial sea to prevent passage which is not innocent".

Tehran doubts that Saudi Arabia could add enough oil to compensate possible shortfalls in case Trump tightens sanctions, the top Iranian energy official highlighted. The 1982 UN Convention on the Law of the Sea affirmed this notion of "innocent passage". The US naval base in Bahrain is entirely there to keep the Strait open.

This article was produced by Globetrotter, a project of the Independent Media Institute.

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