USA aims to reduce Iran’s oil revenue to zero

Eileen GuzmanJul 04, 2018

Oil prices rose strongly last week, with the USA crude contract hitting its highest in 3-1/2 years at $74.46. Oil hesitated at the start of the week, but traders are coming back to the buy side of the table as markets realized Saudi Arabia is in no rush to push oil prices higher again after recently pushing OPEC to lift production limits just last month.

"We are confident that there is sufficient global spare oil production capacity", he added. "And yes, we will certainly be requesting that their oil imports go to zero, without question".

"One factor behind the drawdown has been USA crude exports, which have shot higher to help fill the void left in Europe and Asia by the voluntary and involuntary reductions from OPEC producers", he said in emailed remarks.

Trump, who is spending the weekend at his golf property in New Jersey, said in a tweet on Saturday that Custodian of the Two Holy Mosques King Salman bin Abdulaziz Al Saud of Saudi Arabia had agreed to produce more oil. Prices to (sic) high!

"There are indications that Iranian oil exports have already begun dropping during the first half of June, mostly to Europe".

Libya's National Oil Corporation declared "force majeure", or unforeseeable circumstances, as the country's continued struggles with internal conflicts see approximately 850,000 barrels per day after losing control of Zueitina and Hariga ports this week.

In late 2016, OPEC members and 11 non-OPEC countries struck a deal to reduce oil output by 1.8 million barrels per day compared to October 2016.

Apart from Iran, Venezuela, Libya and Angola are also facing chronic production issues.

Inventories at Cushing fell 2 million barrels last week, according to a separate forecast compiled by Bloomberg.

An International Energy Agency scenario projects oil production falling by around 1.5 million bpd due to the loss of Iranian and Venezuelan oil.

At present, lower crude prices will only serve to hamper Canadian exports and have a knock-on effect on GDP when the nation has a central bank rate decision coming up next week.

"Also, taking a broad range of estimates from IEA, EIA and others, Saudi held spare capacity in the range of 1.3 - 2.1 mb/d when oil production was ~10 mb/d". Iran, however, said it would be tough to erase its oil completely from the market by November, when US sanctions snap back into place.

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