WEEKLY ENERGY RECAP: Oil sees big weekly loss as Iran struggles to store crude

Oil prices ended last week with the biggest weekly losses of the year. Brent fell below the $70 psychological barrier to $68.69 a barrel. (Reuters/File Photo)
Updated 25 May 2019
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WEEKLY ENERGY RECAP: Oil sees big weekly loss as Iran struggles to store crude

  • The market remained under pressure from US stock-build for the third week in a row

RIYADH: Oil prices ended last week with the biggest weekly losses of the year. Brent fell below the $70 psychological barrier to $68.69 a barrel, while WTI dropped under $60 to $58.63.
The market remained under pressure from US stock-build for the third week in a row. But what mostly pushed prices lower was the low speculator activity, amid hesitation to add bets on almost flat price fluctuations.
The direction of oil prices has apparently ignored the tight physical market, amid signs that OPEC+ may extend its output cuts extensions, US sanctions against Iran and Venezuela, and slower Russian exports due to a contamination of some of its crude.
While Iran said it has already resumed oil sales to China, its biggest buyer, tanker tracker data suggests its total exports have plummeted. Iranian exports fell to 500,000 barrels per day or lower in May, more than half the level seen in April, the data suggest. However, Iran needs to keep oil flowing as any suspension would damage its future operations at its aging oil fields.
To keep its operations going as exports slump and sanctions block purchases, Iran has been forced to store more oil on land and at sea.
But that brings myriad problems. Iran’s land storage is very limited due to poor oil infrastructure and logistics that haven’t been developed since the mid-1970s. At sea, it has an aging fleet of ships, and it will face difficulties with insurance and in striking agreements with shipping companies.


‘Huge increase’ in crude prices not expected: IEA executive director

Updated 19 July 2019
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‘Huge increase’ in crude prices not expected: IEA executive director

  • The International Energy Agency is revising its 2019 global oil demand growth forecast down to 1.1 million barrels per day
  • IEA’s Fatih Birol: Serious political tensions could impact market dynamics

NEW DELHI: The International Energy Agency (IEA) doesn’t expect oil prices to rise significantly because demand is slowing and there is a glut in global crude markets, its executive director said on Friday.
“Prices are determined by the markets ... If we see the market today, we see that the demand is slowing down considerably,” said IEA’s Fatih Birol, in public comments made during a two-day energy conference in New Delhi.
The IEA is revising its 2019 global oil demand growth forecast down to 1.1 million barrels per day (bpd) and may cut it again if the global economy and especially China shows further weakness, Birol told Reuters in an interview on Thursday.
Last year, the IEA predicted that 2019 oil demand would grow by 1.5 million bpd. But in June this year it cut the growth forecast to 1.2 million bpd.
“Substantial amount of oil is coming from the United States, about 1.8 million barrels per day, plus oil from Iraq, Brazil and Libya,” Birol said.
Under normal circumstances, he said, he doesn’t expect a “huge increase” in crude oil prices. But Birol warned serious political tensions could yet impact market dynamics.
Crude oil prices rose nearly 2 percent on Friday after a US Navy ship destroyed an Iranian drone in the Strait of Hormuz, a major chokepoint for global crude flows.
Referring to India, Birol stressed the country could cut its imports, amid rising oil demand in the country, by increasing domestic local oil and gas production.
Prime Minister Narendra Modi had set a target in 2015 to cut India’s dependence on oil imports to two-thirds of consumption by 2022, and half by 2030. But rising demand and low domestic production have pushed imports to 84 percent of total needs in the last five years, government data shows.
Meanwhile, the IEA doesn’t expect a global push toward environmentally friendly electric vehicles can dent crude demand significantly, Birol said, as the main driver of crude demand globally has been petrochemicals, not cars.
He said the impact of a serious electric vehicle adoption push by the Indian government would not be felt immediately.