- OPEC reports lower production from Saudi Arabia
- Th USA imposes fresh sanctions on Iran, threatens nations still trading with Iran
- Weekly crude oil inventories report a build up
- EIA revises down U.S. oil production for 2018
Oil prices were seen trading mixed during the week amid a mixed fundamental outlook. While the core fundamentals for crude oil on the supply side were hawkish, the once again escalating trade wars dampened the outlook for oil prices this week.
Fundamental developments over the week included the report by OPEC about a decline in production from Saudi Arabia and the U.S. hitting Iran with sanctions.
Earlier in the week, OPEC released a statement where it noted that crude oil production from Saudi Arabia, OPEC’s largest oil producer had declined in July.
The news raised concerns about a possible supply glut. OPEC’s report showed that Saudi Arabia’s oil production in July was around 10.29 million barrels per day. This was a decline of about 200,000 bpd.
The news sent oil futures prices surging as Saudi Arabia had previously pledged in June to raise output from July alongside Russia.
Meanwhile, the U.S. administration imposed fresh sanctions on Iran. Iran is expected to have shipped about 3 million barrels per day in July. The re-imposition of sanctions was aimed at metals, coal and industrial software including automobile sector.
Despite the sanctions, many other trading partners with Iran including the European Union, China and India have expressed their desire to continue trading oil with Iran.
However, the U.S. administration was seen stepping up pressure on the remaining trading partners to stop buying Iranian crude oil shipments.
A senior U.S. administration official reportedly told reporters that it was the U.S. policy to get as many countries as possible to stop buying crude oil from Iran. President Trump followed up with strong words on Tuesday by tweeting that “Anyone doing business with Iran will NOT be doing business with the United States.”
The sanctions are part of Iran’s nuclear deal in 2015 which was signed by the Obama administration along with a host of other nations. After pulling out of the nuclear accord, Trump threatened to re-impose sanctions.
On Thursday, the U.S. Energy Information Administration’s weekly crude oil inventory report showed that there was a build up of 3.9 million barrels. This came against the estimates of a 1.2 million decline.
The EIA’s report was in contrast to that of the API’s report released earlier in the week. The data from API showed a draw of 6 million barrels.
According to the EIA, the refineries processed 17.6 million barrels of crude oil on a daily basis. This was slightly higher than the 17.5 million barrels produced during the week before. Gasoline inventories were seen adding 2.9 million while distillate inventories rose by 1.2 million barrels.
The EIA had also released its forecasts on U.S. oil production. According to new forecasts, oil production growth is set to decline compared to the previous estimates. The EIA’s report forecast that the U.S. will produce on average 10.68 million barrels per day in 2018. This was a slight downward revision from 11.8 million barrels per day previously.
The report said that the output growth during past spring was not as strong as it had expected to lead to an insignificant but a lower revised print.
WTI Crude oil prices failed to make any significant gains and the commodity started to decline by mid-week after failing to rally above the previous week’s high.