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UPDATE 8-Crude rises to highest since July on sanction concerns

Published 31/08/2018, 05:16 am
© Reuters.  UPDATE 8-Crude rises to highest since July on sanction concerns
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* U.S. crude output, storage, drilling: https://tmsnrt.rs/2wc5wpr

* Global oil markets to tighten toward end of 2018 - IEA

* Cushing crude stocks rise 107,433 bbls since Friday -Genscape (Updates with settlement prices)

By Jessica Resnick-Ault

NEW YORK, Aug 30 (Reuters) - Oil prices rose on Thursday to the highest in more than a month, extending gains on growing evidence of disruptions to crude supply from Iran and Venezuela and after a fall in U.S. inventories.

Brent crude oil LCOc1 rose 63 cents a barrel to settle at $77.77. U.S. crude CLc1 settled 74 cents higher at $70.25 a barrel, after earlier hitting a session high of $70.50. Both contracts were at their highest in more than one month.

A rally that started earlier in the day accelerated as U.S. crude rose above $70 a barrel, and more speculators entered the market, said Bob Yawger, director of futures at Mizuho in New York. "There are pretty good tailwinds here that will keep people jumping on board," he said. Brent's wide premium to WTI is likely to encourage exports of U.S. crude, keeping U.S. inventories lower and boosting activity following weekly inventory data, he said.

Brent has risen by almost 10 percent over the past two weeks on widespread perceptions that the global oil market is tightening and could run short in the next few months as U.S. sanctions restrict crude exports from Iran.

"There are a lot of supportive factors here," said John Kilduff, a partner at Again Capital Management in New York.

In addition to support from geopolitical events, natural disasters could impact the market if a potential storm system currently off the coast of Africa strengthens and heads to the Gulf of Mexico, he said. oil market is once again tightening," said Giovanni Staunovo, analyst at Swiss bank UBS in Zurich. "Iranian oil export declines are already visible well in advance of U.S. oil-related sanctions, which enter into force in November."

Iranian crude exports are likely to drop to a little more than 2 million barrels per day (bpd) in August, against a peak of 3.1 million bpd in April, as importers bow to American pressure to cut orders. Organization of the Petroleum Exporting Countries, in which Iran is the third-biggest producer, will discuss in December whether it can compensate for a sudden drop in Iranian supply after sanctions start in November, the head of Iraq's state oil marketer SOMO, Alaa al-Yasiri, said on Wednesday. exports from crisis-struck OPEC member Venezuela have also fallen sharply, halving in recent years to about 1 million bpd. U.S. oil inventory data on Wednesday also helped the bullish trend.

U.S. commercial crude inventories USOILC=ECB fell by a larger than expected 2.6 million barrels in the week to Aug. 24, to 405.79 million barrels, the Energy Information Administration said. EIA/S

U.S. production C-OUT-T-EIA was flat from the previous week's record of 11 million bpd. market pared gains slightly after information provider Genscape said inventories at the delivery hub at Cushing, Oklahoma had risen 101,433 barrels since Aug. 24, traders said.

The International Energy Agency (IEA) has warned of a tightening market toward the end of the year because of falling supply in countries such as Iran and Venezuela combined with strong demand, especially in Asia.

"Definitely there are some worries that oil markets can tighten towards the end of this year," IEA Executive Director Fatih Birol told Reuters on Wednesday. Paribas global oil strategist Harry Tchilinguirian highlighted a combination of supply risks.

"As Iranian oil exports are lost to the market, Venezuelan production continues to decline, Angola struggles to maintain output and Libya is subject to episodic outages," he told the Reuters Global Oil Forum.

"The path of least resistance (for prices), at least in our view, is up."

Still, the market could face renewed headwinds from uncertainty about growth in emerging markets, said Again Capital's Kilduff. "What's been holding us back is demand concerns. We thought Argentina was put to bed and it is a detracting factor."

Argentina's central bank on Thursday yanked up its benchmark interest rate to 60 percent from 45 percent in a bid to control inflation running at more than 31 percent as the country's currency plummeted 15.6 percent to a record low 39 pesos per U.S. dollar. GRAPHIC: Venezuela crude oil exports png

https://tmsnrt.rs/2LvCPtl GRAPHIC: U.S. oil drilling, production & storage levels png

https://tmsnrt.rs/2OKP4nJ

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