Global oil market faces key test as supply tightens


Rising oil prices are another incentive for producers to turn on the spigot - Brent futures, the global benchmark for the price of crude oil, were hovering near $80 a barrel Wednesday.

Brent crude futures climbed 24 cents, or 0.3 percent, to $79.30 a barrel.

Futures in NY dropped as much as 1.8 percent after closing at the highest in nearly two months.

U.S. crude oil production in 2018 is expected to grow 1.31 million barrels per day to 10.66 million bpd, little changed from EIA's previous forecast.

"Oil prices jumped overnight as American Petroleum Institute inventory data showed a large drawdown in inventories", said William O'Loughlin, investment analyst at Australia's Rivkin Securities.

Crude climbed to $80 a barrel in London for the first time since May amid signs that global supplies are shrinking.

Output from OPEC member Iran in August hit its lowest level since July 2016, the IEA said, "as more buyers distanced themselves from Tehran ahead of looming USA sanctions", the report said.

US light crude pushed over $70 on Wednesday due to falling USA crude inventories and production levels.

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Regarding crude oil production, the EIA said on Tuesday it expected USA output to rise by 840,000 barrels per day (bpd) between 2018 and 2019 to 11.5 million bpd, lower than a rise of 1.02 million bpd to 11.7 million that was previously forecast.

Iranian fuel oil exports to Singapore collapsed in August, a source in the Middle East fuel oil market told Platts, adding that fuel oil exports to Fujairah and Singapore are expected to slow down.

OPEC and its allies are in constant contact on production, Russian Energy Minister Alexander Novak said.

Tehran faces the loss of the majority of its export markets for energy as Washington prepares to place sanctions on its sale of oil beginning November 4 after it pulled out of the nuclear deal with Iran last May.

Brent crude traded near a two-month high as shrinking oil inventories pointed to an increasingly tight global market.

USA efforts to isolate Iran have disrupted shipments from OPEC's No 3 supplier at the same time that American crude stockpiles dwindled to a 3 1/2-year low. "The situation should be closely watched, the right decisions should be taken". Iranian oil exports should go from about 2.7 million bpd-2.8 million bpd from earlier this year to about 1 million bpd-1.2 million bpd by the end of this year, Sen told CNBC earlier this month.

While US policy on sanctions against Iran has helped to support the oil price in recent weeks, its trade wars with China and Turkey are competing as a downward drag on the market.