United States oil price rises after sharp decline

Eileen GuzmanJul 10, 2018

If Beijing does impose tariffs on American oil, it could put downward pressure on the price of West Texas Intermediate crude, the USA benchmark, and may weaken its spread to Brent oil, the global market standard.

At 0734 GMT, August WTI crude oil is trading $73.02, up 0.07 or +0.10% and September Brent crude oil is at $77.17, down $0.22 or -0.28%.

"We're continuing to see - and I expect the trend will continue - lower inventories in Cushing in July, resulting in a very tight light sweet crude market", said Andrew Lipow, president of Lipow Associates.

Earlier, OPEC and a group of non-OPEC countries agreed that they would return to 100 percent compliance with previously agreed oil output cuts, after months of underproduction by OPEC countries. For the week ended on July 6, the total number of oil drilling rigs in the USA increased by 5, or by 0.6 percent - to 863 units.

Although Saudi Arabia and Russian Federation have said they would raise output to make up for disruptions, FGE said “there simply is not enough capacity to make up for Iran's crude losses, plus Venezuela and Libya”, and warned of the possibility of oil prices rising to $100 per barrel.

Renewed U.S. sanctions on Iran against its oil exports look to tighten supply further.

"Increased Saudi crude availability that is being enhanced by reduced OSPs (official selling prices) into Europe and other regions is providing a strong counter against curtailed Libyan export activities", Ritterbusch wrote.

Rather than increase, the number of Iranians naturalized in the USA declined after the deal was signed, from 10,344 in 2015 to 9,507 in 2016, according to the Department of Homeland Security.

An executive from China's Dongming Petrochemical Group said he expected Beijing to soon impose the tariff on USA oil imports.

FGE said the USA government may grant some waivers to allies that are particularly reliant on Iranian supplies and that some Iranian oil would also be smuggled into global markets.

US producers are continuing to bring more rigs into oilfields already producing at record levels. The overall rig count increased by five rigs, according to the report, with all of that increase coming from oil rigs, the number of gas rigs stayed the same.

That brings the total count to 863, up 100 from a year ago.

Conflicting opinions over what will happen to crude supplies in the near future, coupled with concern over the escalating trade war between the US and China, was appropriately matched by mixed market performance for crude on Friday, with the USA benchmark achieving modest price gains and the global benchmark slipping slightly.

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