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18 May 2018, 09:34 | Bernice Figueroa
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Oil fell on Wednesday ahead of an anticipated rise in USA crude inventory that could provide more evidence that demand may be slowing in spite of ongoing crude output cuts by producer group OPEC and imminent US sanctions against Iran, Reuters reports.
Brent crude futures were at $79.40 per barrel at 0655 GMT, up 0.12 percent from their last close.
Global oil stocks in the Organization for Economic Cooperation and Development countries hit their lowest level in three years in March, the International Energy Agency said Wednesday.
"At $80 per barrel, there will be some impact on demand", warned Patrick Pouyanne, CEO of French oil explorer Total SA.
Pouyanne said Thursday that it was "impossible" to do business with Iran without a waiver from USA sanctions since Total can not risk losing access to the U.S. banking system. USA light crude was 60 cents higher at $71.56 a barrel, also close to its highest since November 2014.
On May 8 President Donald Trump announced his decision to withdraw the U.S. from the Iran nuclear deal, also pledging to reinstate the anti-Iranian sanctions that were lifted as a result of the agreement.
France's Total warned on Wednesday that it might abandon a multibillion dollar gas project in Iran if it could not secure a waiver from USA sanctions, casting further doubt on European-led efforts to salvage the nuclear deal. "We continued to receive support from concerns about supply from the Iranian nuclear accord, Venezuela.as well as the draw in crude", McGillian said.
Separately, Al-Falih and United Arab Emirates Energy Minister Suhail Al Mazrouei said recent moves in oil prices have been driven by geopolitics and that global supply remains ample, according to a statement released by the Saudi energy ministry.
The IEA said global oil demand would average 99.2 million bpd in 2018.
"While recent data confirms strong growth in first quarter 2018 and the start of second quarter 2018, we expect a slowdown in the second half of the year largely attributable to higher oil prices", the IEA stated. The US can renew economic sanctions against Iran including the petroleum sector.
Crude stocks fell by 1.4 million barrels last week, nearly double the 763,000 barrel drop expected by analysts.
As an aside, analysts at Barclays Research bumped up their forecast for the price of oil in 2020 and beyond from $60 a barrel to $65.
The possibility of having to cut oil imports from Iran should not hurt China as much, amid a glut in domestic supply of oil products, said She Jianyue, chief analyst at state-owned China National Offshore Oil Corp. A major disruption in Iran could send crude prices higher just as the oil market is emerging from a prolonged period of oversupply.
US crude oil production has soared by more than a quarter in the last two years, to a record 10.72 million barrels per day.
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