Oil in Global Economy Series: Russia's oil production at record high

India and China’s combined purchases of Iran oil will decline to almost 1 million barrels a day from about 1.3 million because of the US sanctions

Amid fears of being sanctioned by US, Japan to stop importing oil from Iran

Near-term futures for Brent crude, the benchmark for more than half the world's oil, are trading higher than later contracts in a market structure known as backwardation that typically signals a supply squeeze.

Global oil markets have tightened over the past month, pushing Brent prices up by more than 10% since the middle of August. Yesterday, WTI ended the day slightly higher while Brent crude traded at highs last seen in July earlier this year. China also made similar comments and was said to have rejected an American request to cut imports.

Tehran is offering nearly free shipping and extended credit period, arranging for tankers and insurance after Indian firms including Shipping Corp of India (SCI) were forced to halt voyages to Iran due to USA sanctions.

Oil could gain support if weekly reports on USA inventories show a drop in crude inventories, as expected.

"Prices yesterday rose in anticipation that the storm could inflict some damage on the production and refining sector, but after all was said and done we lost a little bit of production and the refineries in MS and Louisiana continued to run as Gordon made landfall", said Andrew Lipow, president of Lipow Oil Associates.

U.S. service member in Afghanistan killed in 'insider attack'
There have also been insider attacks against Afghan forces. "Enemy is first ISIS, then government", Taliban commander Agha said. He says the Taliban share an enemy with the USA and its allies, which is ISIS in Afghanistan.

OPEC and its allies agreed in June to increase combined output by 1 MMbpd to meet consumer demand and prevent a sharp rise in prices.

Stephen Innes, head of trading for Asia-Pacific at brokerage OANDA, said Brent was "supported by the notion that US sanctions on Iranian crude oil exports will eventually lead to constricted markets". Russian production has now surpassed the Soviet era peak above 11 million barrels per day. With concerns growing that global spare capacity will be stretched if other producers such as Saudi Arabia pump more to make up for the loss, the oil market is revealing risks of a crunch. "It therefore remains unclear whether OPEC will be able to absorb a potentially massive fall in Iranian oil exports due to the United States sanctions", they added.

The Persian Gulf nation shipped just under 2.1 million barrels a day of crude and condensates in August, ship-tracking data compiled by Bloomberg show. With investors anticipating less supply from Iran due to upcoming USA sanctions, and Libya and Venezuela producing far-less than expected, the markets remain vulnerable to unexpected supply disruptions. The deal has worked with prices now between $70 and $80 a barrel.

The reports said: "The impact of the sanctions will not be confined to the oil industry and will weigh on all components of GDP on the expenditure side".

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