Oil Above $80, Saudi Arabia Plans to Increase Production

Alicia Cross
October 25, 2018

And on Monday, the Russian news agency TASS reported that Saudi Arabia said it wouldn't respond to sanctions with a 1973-style oil embargo on Western consumers.

Companies also skipped nominating barrels they are entitled to from their investment in Iranian oil fields, the person added.

In China, Iran's biggest oil buyer, the Bank of Kunlun is set to stop handling payments from the Islamic Republic in November, appearing to bow to United States pressure. "That basically means Iran will have to stop importing from China", said an executive with an eastern China-based manufacturer that exported electronic components to Iran until recently.

Both China and Russian Federation as well as other countries are expected to continue purchasing Iranian oil, and U.S. officials worry that Moscow will help Tehran evade sanctions.

Saudi Arabia will separate its oil policy from politics, the country's oil minister Khalid al-Falih said. Iran, for its part, is keen to keep its single biggest oil customer when USA sanctions on Iranian oil exports kick in.

U.S. West Texas Intermediate crude futures rose 39 cents to settle at $66.82 a barrel, up 0.6 per cent.

"While in the near term prices are at risk from any further supply disruption, oil should trend lower heading into 2019 as slowing emerging market demand growth and the shale boom restore the oil market's supply cushion", he said. The recent declines are mostly because of the commitment by Saudi Arabia to increase production.

US nuclear program-related sanctions against Iran will go in effect by November 5.

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"As long as America targets Iran, one of the biggest crude producers, with sanctions, the volatility in the oil market will continue", said Bijan Zanganeh, Iran's oil minister. That's the highest it has been in 3 years and 11 months.

OPEC still hasn't revived output to what it was producing prior to the 2017 cuts.

Meanwhile, Russia's oil production is now 150,000 bpd higher than the October 2016 level, the baseline for the global oil production deal, TASS news agency quoted Energy Minister Alexander Novak as saying.

Oil prices have rallied this year on expectations that the sanctions will strain supplies by lowering shipments from Iran, OPEC's third-largest oil producer.

USA production is projected to increase to 11.7 million barrels per day next year, compared with 10.7 million this year, due to Permian basin production.

According to the latest OPEC production report, Iranian oil production had come down to 3.4 million barrels per day as of September.

OPEC and its 10 non-OPEC partners, led by Russian Federation, have surpassed their aim stated at their meeting in June of raising production by a combined 1 million barrels per day from May levels.

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