Economy

Saudi Arabia reins in oil production as demand forecasts waver

Saudi Arabia reins in oil production as demand forecasts waver

Investors are now seen weighing bullish factors that include potential supply disruptions to Iranian crude exports against more bearish indicators, such as broad greenback strength and a ramp-up in production by OPEC and its allied partners.

Oil prices moved up yesterday as United States of America (USA) sanctions against Iran pointed towards a tighter market, even as concerns over slowing economic growth amid global trade tensions kept a lid on gains.

"Discount is part of the nature of the global markets being offered by all oil exporters", IRNA reported the source as saying on Monday.

Among these political uncertainties, "it is trade-related developments in particular that warrant close monitoring in the near-term", OPEC said, noting that the strong economic growth forecast assumes that there won't be significant rises in trade tariffs and current disputes will be resolved soon.

"With U.S. sanctions on Iran back in place all eyes have been on the impact on crude oil exports from that country", ANZ bank said yesterday.

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At the same time, OPEC lowered its global oil-demand growth estimate by 20,000 bpd, to 1.64 million bpd this year.

USA energy companies last week increased their number of active oil rigs by the most since May, adding 10 rigs to bring the total count to 869, according to the Baker Hughes energy services firm. Futures fell as much as 2.5percent in NY yesterday as the dollar rose, diminishing the buying power of developing economies.

It also said that trade friction between the United States and China was unlikely to have much impact on global oil demand growth, unless the rifts spread beyond those two nations. "China trade war, but the strong dollar that, if (it) lasts, will put (an) nearly unbearable burden on consuming countries", he added.

"Saudi Arabia and Russian Federation seem to have drawn a line in the sand with $80/barrel as the level above which demand destruction could begin to emerge", Hansen said.

Brent crude has fallen back to about $72 a barrel as the questions over demand have offset concerns over supply disruptions, such as USA sanctions on Iran, which had helped to propel the global oil benchmark to highs of $80 a barrel in May. "You continue to see signs that demand is pretty robust".