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Oil edges up on supply concerns

19 September 2018

Technical analysis from Reuters market analyst Wang Tao showed that US oil prices have repeatedly failed to overcome a resistance level of $69.85 per barrel, signalling a dissipation of positive outlook.

He didn't address how the global oil industry immediately can replace Iranian crude supplies in an already-tight market.

Brent futures LCOc1 also rose but the gains were more muted, as the global benchmark ended 37 cents, or 0.5 percent, higher at $79.40 a barrel.

US West Texas Intermediate crude Clcl was down 15 cents, or 0.22 percent at $68.76 per barrel.

In the previous session, Brent rose 1.3 percent on a media report that Saudi Arabia, the world's largest oil exporter, was comfortable with prices above $80, indicating the producer would not try to increase output to drive prices lower.

"We believe that the full effect of the Iranian oil sanctions has yet to be seen and we feel that the next 5-6 week anticipatory phase of the official sanctions will associate with steady speculative buying interest", Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

Reuters reported on September 5 that Saudi Arabia wants oil to stay between $70 and $80 a barrel to keep a balance between maximizing revenue and keeping a lid on prices until USA congressional elections.

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The trade dispute is raising concerns about the potential for slower growth in oil consumption, offsetting supply concerns stemming from the upcoming US sanctions on Iran.

On Monday, Russia's Energy Minister Alexander Novak said that OPEC and non-OPEC members would discuss all possible supply scenarios when they meet this month in Algeria.

USA crude stocks increased by 1.2 million barrels according to the American Petroleum Institute (API), sharply reversing the market forecast of -2.7 million barrels, raising prospects for a widening premium in the Brent versus WTI with crude runs worsening in Europe and Asia. Russia, the world's largest oil producer, and other producers in OPEC have kept in place a supply agreement to maintain prices while at the same time providing enough oil to the market.

US sanctions affecting Iran's petroleum sector will come into force from November 4, though many buyers have already curbed their purchases, raising questions about how the market will make up the lost supply.

USA crude stockpiles rose by 1.2 million barrels to 397.1 million in the week to September 14, the American Petroleum Institute said.

Beijing on Tuesday quickly added $60 billion of US products to its import tariff list in retaliation for President Donald Trump's planned levies on $200 billion worth of Chinese goods.

Oil edges up on supply concerns