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Published: Mon, August 06, 2018
Economy | By Melissa Porter

Oil futures steady on market's long-term bearish focus

Oil futures steady on market's long-term bearish focus

Crude oil prices declined on Wednesday, due to concerns about excess supply in the market after data showed an unexpected jump in US crude stockpiles.

Concerns about demand from China also increased Friday as state oil major Sinopec cut its purchases of USA crude.

At the Multi Commodity Exchange, crude palm oil for this month rose by Rs 1.60 or 0.27 per cent to Rs 590.50 per 10 kg in a business turnover of 212 lots.

Crude oil production from the Organisation of Petroleum Exporting Countries increased last month as Saudi Arabia pumped near-record volumes to make good on a pledge to consumers that demand would be met. That's an average monthly intake of 2.35 million barrels of US crude.

Initially, the OPEC+ members agreed on a combined cut of 1.8 million bpd but lower production by a number of countries in fact made the cuts deeper, raising fears of global oil shortages and a potential spike in the oil prices as a result.

At 1010 GMT, the October ICE Brent crude futures contract was down 10 cents from Thursday's settle at $73.45/b, while the NYMEX WTI September contract edged down 3 cents to $68.93/b.

Crude oil futures remained relatively stable in European morning trading, following yesterday's rally of more than $1/b, as the market held up against short-term bearish factors that continue to weigh on sentiment.

Russian oil output rose by 150,000 barrels per day (bpd) in July from a month earlier, to 11.21 million bpd, energy ministry data showed on Thursday. "We could even see light sweet Nigerian barrels being displaced from India, and heading to China instead", he added.

Even with last week's rise, overall US crude inventories are below the 5-year average of around 420 million barrels.

The United States believes Iran is preparing to carry out a major exercise in the Gulf in the coming days, apparently moving up the timing of annual drills amid heightened tensions with Washington, U.S. officials told Reuters on Wednesday.

U.S. President Donald Trump's decision to pull out of an worldwide nuclear deal and reimpose sanctions on Iran has angered Tehran.

"There are a lot of escalation points that could occur very quickly and that worries me", Jonathan Barratt, chief investment officer at Ayers Alliance in Sydney, said.

But a complete halt to Iranian supplies looks unlikely with Bloomberg reporting on Friday that China, Iran's biggest customer, has rejected a US request to cut imports from the OPEC member.

China has said it plans to impose tariffs on liquefied natural gas, raising concerns that it could also impose tariffs on oil, said John Kilduff, partner at Again Capital Management in NY. Senior Iranian officials have warned the country would not easily yield to a renewed USA campaign to strangle Iran's vital oil exports.

That compares with a forecast for a 3-million-barrel decline in a Bloomberg survey of analysts.

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