The world's top oil buyers are discovering that USA sanctions on Iran will squeeze their trade flows whether they agree with America or not. While supply shortage from Iran supports upside in prices, Saudi Arabia, Russia and the United States have the ability to fill the gap in supply caused by the sanctions on Iran. "Is demand going to continue as strongly as it did?"
"Exports from OPEC's third-biggest producer are falling faster than expected and worse is to come ahead of a looming second wave of US sanctions", said Stephen Brennock, analyst at London brokerage PVM Oil Associates. OPEC and Russian Federation, the world's largest producers, promised to boost supply a few days afterwards.
To reach the oil terminal on Khark Island, tankers must now pass through the narrow Strait of Hormuz, slowing down deliveries.
As Iranian oil is cheaper than that from other countries, the suspension will increase the distributors' costs and could lead to higher gasoline prices in Japan.
OPEC oil output has risen this month to a 2018 high as Libyan production recovered and Iraq's southern exports hit a record, a Reuters survey found, although a cut in Iranian shipments due to United States sanctions limited the increase.
No one trading with Iran will do business with America, he said.
"There is a danger that the demand will be impacted as well".
"I see that as a possibility as well". USA crude CLc1 was 30 cents higher at $70.10.
President Trump will likely move ahead this week with more duties for Beijing, putting in place another $200 billion in tariffs on Chinese goods, Bloomberg reported on Friday, citing six people familiar with the matter. As per the trade data and Reuters, the company has set a record discount price of its crude oil for September since 2004.
FGE estimates Iran's exports will slump to below 1 million barrels a day by mid-2019, while industry consultant Energy Aspects Ltd. expects a plunge of 1.5 to 1.7 million in daily shipments by the end of this year from current levels of about 2.5 million.
"If the market is deprived of around one million barrel per day supply from Iran, it could tighten the supply in the oil market", said Jain.
In terms of recent demand, China's crude oil imports recovered slightly in July after falling for the previous two months, according to Reuters.
Iran suffered the biggest output drop across the group, of 240,000 bpd, pushing its production down to 3.5 MMbpd. Oman is a principal supplier of oil to China with the Asian superpower buying nearly 90 percent of its exports in 2017, according to the news agency.