Oil holds gain near $69 amid declining USA crude inventories

Crude Oil Supply

Crude Oil Supply

It is not clear whether China, the biggest buyer of Iranian crude, will bow to USA pressure.

American crude shipments to China are around 400,000 barrels per day (bpd), worth $1 billion a month at current prices.

Iran's oil flows are expected to fall in the coming months as the second round of USA sanctions, which target the oil sector, resume in early November.

At 1500 GMT, October ICE Brent was trading $1.81 lower at $72.84/b, while September NYMEX crude was down $1.87 at $67.30/b.

Crude oil prices plunge to their lowest levels in six weeks after total USA stockpiles of oil and fuel rose to a seven-month high and U.S.

Inventories at Cushing, Oklahoma, the NYMEX crude futures delivery and pricing point, tightened further, falling 590,000 barrels to 21.8 million barrels, the EIA data showed.

The President Donald Trump administration has urged all countries to end imports of Iranian oil by November 4 as part of its new policy of hostility towards Tehran after Washington's unilateral exit from the 2015 nuclear agreement.

The mounting trade tension has raised concerns that global economic growth will slow, lowering demand for crude oil in the process.

While the trade war and the USA inventories report dragged oil prices down on Wednesday, for the coming months, investors, traders, and analysts expect the return of the US sanctions on Iran to continue keeping a floor under the price of oil.

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Concerns over recent figures from Chinese crude oil exports have been weighing on traders' sentiment, although the descent should be somewhat tempered by rising speculations of further U.S. sanctions against Iran.

"Oil had been largely immune from the escalating trade dispute, however the recent application of tariffs by China on U.S. petroleum products does represent a step change for the energy market", said Daniel Hynes, a Sydney-based analyst at Australia & New Zealand Banking Group Ltd.

Exports to China rose to 799,452 bpd in July from 722,100 bpd in June, while Iranian oil sales to India increased by more than 40,000 bpd from June to 706,452 bpd in July, S&P Global Platts data shows.

United States sanctions on Iran's energy sector are set to be re-imposed after a 180-day "wind-down period" ending on November 4.

"A full embargo seems unlikely and the oil market should remain well balanced in light of rising production and the emerging markets' fuel inflation pains", Norbert Rucker, head of macro and commodity research at bank Julius Baer, said.

Gasoline stocks rose by 2.9 million barrels, compared with analysts' expectations in a Reuters poll for a 1.7 million barrel drop.

The list of USA goods released by China on Wednesday includes diesel, fuel oils and other petroleum products.

Prior to this deal, International Olympic Committee had struck deals for importing 10 million barrels from six cargoes in the spot market.

After snapping tariffs on steel and aluminium imports from a number of allies, the United States has been engaged in an escalating duel with China with levies being announced on a growing range of goods.

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