Oil prices drop as escalating trade war clouds demand outlook

Oil prices drop as escalating trade war clouds demand outlook

Oil prices drop as escalating trade war clouds demand outlook

Tehran feels increasingly under pressure after President Donald Trump pulled out of the landmark nuclear deal between Iran and world powers in May. The focus on oil supply has been reflected in the options market this week, where investors have scooped up large amounts of bullish buy, or call, options.

Oil prices were up early Tuesday morning amid reports that Saudi Arabia would be comfortable letting oil prices rise above $80 a barrel.

Benchmark Brent crude already is nearing $80 a barrel and analysts believe it may go even higher as production remains low.

USA oil futures rose more than $1 a barrel on Wednesday, bolstered by a fifth weekly crude inventory drawdown and strong domestic gasoline demand, amid ongoing supply concerns over US sanctions on Iran that come into force in November.

Oil prices slipped on Tuesday morning in Asia as the US vowed to impose 10% tariffs on a further $200 billion worth of Chinese goods on Monday, which rattled the markets.

Reuters reported on September 5 that Saudi Arabia wanted oil to stay between $70 and $80 to keep a balance between maximising revenue and keeping a lid on prices until USA congressional elections.

"Mr. Trump's attempt to prevent Iran from appearing on the global crude oil markets has allowed Russian Federation and Saudi Arabia, which would not favor low prices, to pursue hostage-taking policies in the market", Iranian OPEC governor Hossein Kazempour Ardebili said on Saturday.

US oil futures surged almost 2 percent on Wednesday as they were bolstered by a fifth weekly crude inventory drawdown and strong domestic gasoline demand amid ongoing global supply concerns over USA sanctions on Iran that come into force in November.

The producer group said in June that it would agree to some supply increases starting in July, though the specific targets were not announced at the time.

United States crude inventories rose by 1.2 million barrels to 397.1 million in the week to Sept 14, according to data released on Tuesday by the American Petroleum Institute (API).

Bloomberg reported Tuesday, citing unnamed Saudi sources, the kingdom was now comfortable with prices above $80 per barrel, at least for the short-term.

Crude inventories fell 2.1 million barrels last week to 394.1 million barrels, the lowest level since February 2015, EIA data showed.

"Traders are ignoring today's API data. while focusing on news from the Middle East", Stephen Innes, head of Trading for APAC at OANDA wrote in a note.

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