Oil prices steady after Iranian exports fall further

Oil Barrels

Oil Barrels

Prince Mohammed told Bloomberg: "The request that America made to Saudi Arabia and other OPEC countries is to be sure that if there is any loss of supply from Iran, that we will supply that".

Jeremy Weir, chief executive of Trafigura, said at the Oil & Money conference in London that he would not be surprised to see oil trade at more than $100 per barrel next year.

Some energy market analysts expect around 500,000 barrels per day (bpd) to disappear once US sanctions against Iran come into force, while others have warned as much as 2 million bpd could come offline over the coming months. "Iran's oil can not be replaced by Saudi Arabia".

Oil prices, which account for about 80 percent of Saudi public income, have increased by more than 70 percent since June past year to over $80 a barrel. It was India's second biggest supplier of crude oil after Saudi Arabia till 2010-11 but Western sanctions over its suspected nuclear programme relegated it to the seventh spot in the subsequent years.

U.S. president Donald Trump, who took his first overseas trip as United States president to the kingdom and whose son-in-law Jared Kushner has close ties to Prince Mohammed, said he had not yet talked to the Saudis about Mr Khashoggi, "but I will be at some point".

"The oil market mood is exceptionally bullish, with fears growing that the USA demands for an Iran oil embargo could cause a significant supply shortfall", said Julius Baer commodities research analyst Carsten Menke. Some sanctions took effect from August 6 while those affecting the oil and banking sectors will start from November 4.

He also noted that triple digit prices "would require a sustainable outage in Iranian exports going down to zero plus another disruption someplace like Venezuela; the way we're seeing it is long dated oil prices are rising, the front-end is weakening which is telling you that hey, we don't have a problem today, we potentially have a problem tomorrow".

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The country's largest privately owned crude terminal, the Louisiana Offshore Oil Port, said late on Tuesday it halted operations at its marine terminal.

U.S. sanctions against Iran will kick in from November 4, which will block payment routes. The Trump administration is considering waivers on sanctions for countries that are reducing their imports.

The Middle East crude benchmarks were mixed on Monday with DME Oman's premium to Dubai swaps easing while cash Dubai's premium to swaps edged higher.

For rupee payments, oil companies could use UCO Bank or IDBI Bank to route oil payments to Iran, sources said. "It's still a wait-and-see as to how much production will be boosted, so investors are likely to be cautious and trade in a narrow range until we get some more clarity next month". "This is an obvious fact".

Oil prices edged higher on Tuesday on growing evidence of falling Iranian crude exports before the imposition of new USA sanctions, as well as a partial production shutdown in the Gulf of Mexico because of Hurricane Michael.

A U.S. government official, who spoke on the grounds of anonymity, said the Trump administration is "in the midst of an internal process" of considering exceptions called SRE waivers, or significant reduction exemptions.

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