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OPEC: Conversation to Shift Toward Production Cuts in 2019

OPEC: Conversation to Shift Toward Production Cuts in 2019

In hopes of mitigating the immediate economic hit, Iranian authorities have hinted that Tehran might have to sell its oil at a discount to entice buyers going forward.

The US bank also said "payments for the oil by the exempt countries must go into escrow accounts in their local currency" and that this "means the money won't directly go to Iran and it can only be used to buy certain non-sanctioned goods from its crude export customers".

This group of eight buyers imported over 80 percent of Iran's oil exports previous year.

Crude oil began the post-midterm election day on the defensive.

"Brent oil may slide further into a range of $68.59-$69.69 per barrel", said Reuters analyst Wang Tao.

Tanker-tracking and port data suggests that Iran has already suffered a fairly steep drop in exports prior to the re-imposition of USA sanctions.

The second factor is that, thanks to the shale revolution, United States supplies are growing rapidly.

Washington has said it wants to force Iranian oil exports down to zero, but Bernstein Energy now expects "Iranian exports will average 1.4 million to 1.5 million bpd" during the exemption period, about half the volume in mid-2018.

In addition, Weekly Distillate Stocks dropped by 3.465M barrels and Gasoline inventories rose by 1.852M barrels, more than forecasted.

The net long position in the six most important petroleum-linked futures and options contracts was cut by a further 73 million barrels in the week to October 30.

But it is not only the United States that has meaningfully raised oil production in recent weeks.

Son of slain journalist Jamal Khashoggi expresses 'faith' in Saudi investigation
But in fact, Salah Khashoggi said, the king had assured him that "everybody involved will be brought to justice" for the killing. The tour came as Saudi Arabia faces growing worldwide outrage over Khashoggi's murder on October 2 in its consulate in Istanbul.

Meanwhile, Iran's Shana news agency reported that Iran's oil minister Bijan Zanganeh wrote to OPEC's secretary general calling for two committees tasked with monitoring a deal between OPEC and other countries led by Russian Federation to be scrapped.

With last week's increase, USA oil production has now risen to a record 11.6 million barrels a day, the EIA report shows. Tehran is planning to increase condensate production to one million bpd by 2021 with new phases of the South Pars development, he added. At present, Iran is the third largest supplier of oil to India.

So the supply story is robust. However, having cut bullish bets in WTI and Brent crude oil to 13- and 15-month lows respectively.it would nearly take a fundamental shift in the market outlook for this to deteriorate further.

From a seasonal perspective, crude oil stocks tend to build until late November as demand from refineries slows while they undergo maintenance.

The JTC prepares regular reports on the oil market which inform the group's decisions. The key driver of this, in the short term, is the trade war between the United States and China. WTI settled at US$76.41 a barrel on October 3.

"The market continues to shift from worrying about tightening supplies to acknowledging upside supply risks and weakening demand growth", analysts at JBC Energy wrote in a report.

Front-month Brent crude oil futures were at $70.84 a barrel, 19 cents above their last close.

New Delhi has poured $2 billion into development in Afghanistan since the 2001 USA -led overthrow of the Taliban government.

The Saudis have, since the 1970s, been able to exert disproportionate influence on global oil prices by - along with other Opec producers - cutting production at various times.

With oversupply looming, production cuts might be on the horizon once again. Since May, when Trump took Washington out of the nuclear deal, prices of bread, cooking oil and other staples have soared and the value of the rial currency has plunged.


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