- In the first week of October, crude exports from Iran fall to 1.1 million bpd
- Saudi Arabia fills the supply gap by ramping up production
- Hurricane forces the evacuation of some oil platforms in the Gulf of Mexico
* IMF downgrades forecast of global growth due to trade war sanctions
The decrease in Iranian crude exports is having an impact on oil prices this week, coinciding with new sanctions on Iran by the US, and a disruptive storm in the Gulf of Mexico. Iran has the third largest oil industry in the Organization of the Petroleum Exporting Countries.
Crude rose to $84.56 per barrel, up by 65 cents after falling to $82.66 on Monday. Benchmark Brent achieved an all-time high in 4 years last week at $86.74. Light crude in the US went up to $74.74, an increase of 45 cents.
Carsten Menke, a Julius Baer commodities research analyst said: ”The oil market mood is exceptionally bullish, with fears growing that the U.S. demands for an Iran oil embargo could cause a significant supply shortfall.”
According to industry data and sources, the looming US sanctions that come into effect beginning Nov. 4 have already sent buyers scurrying for alternatives. As a result, Iran’s exports saw a further drop during the first week of October. In a seven-day analysis conducted by Refinitiv Eikon, Iran was sending out 1.1 million bpd. In October, that figure for crude exports dropped well below expectations.
This does not account for the 2.5 million barrels per day reduction that occurred in April, just before the US voided the 2015 nuclear agreement and reinstated restrictions. Furthermore, in September, Iran’s total crude exports had reduced by an additional 1.6 million.
This gives Saudi Arabia an opportunity to expand their output. The country is already OPEC’s largest producer of petroleum products, and next month, their crude output is expected to hit a record 10.7 million barrels per day.
With Iran’s diminishing output, analysts from JP Morgan were quoted as saying that Saudi’s “promise to balance will face a reality check in a month’s time.” Iranian oil officials have called out Saudi Arabia for claiming they would be able to fill the crude exports undertaken by Iran.
In other related developments, almost 20 percent of Gulf of Mexico oil operations were forced to shut down, due to a category 1 storm turned hurricane Michael moving towards Florida.
The impact would be worse if the hurricane’s path widened, but forecasts speculate that it would avoid the major assets of oil companies in the area.
Global economic forecasts for 2018 and 2019 were downsized by the International Monetary Fund. The announcement was made on Tuesday, citing stricter import tariffs and trade disagreements as the reasons for global commerce taking a hit, as emerging markets strive to adjust to the new terms and capital outflows.