London — Crude oil prices rose in Monday morning European trading, buoyed by signs of lower output from Saudi Arabia in July, against the backdrop of the start of US sanctions on Iran on Tuesday, rising OPEC production overall and an escalating trade war between the US and China.
At 1045, October Brent futures were up 75 cents from Friday’s settle at $73.96/b, while the NYMEX September WTI contract was up 98 cents from Friday, at $69.47/b. The US dollar was up 0.25%, which is often bearish for commodities, as it makes buying crude more expensive for buyers who hold other currencies.
Saudi Arabia produced about 10.29 million b/d of crude in July, even as it supplied 10.38 million b/d to the market, implying the country pulled product out of inventories, a Saudi source told S&P Global Platts on Friday. Saudi OPEC Governor Adeeb al-Aama said the kingdom would drop its crude exports by 100,000 b/d in August.
Elsewhere Baker Hughes said on Friday its US rig count, a key proxy for the pace of US production, dropped by two rigs to 859 for the week ended August 3.
These signs of lower output came against the backdrop of a likely overall 340,000 b/d month-on-month rise in OPEC output to an expected 32.66 million b/d in July, according to a survey by S&P Global Platts. The forecasts come ahead of the highly anticipated monthly report from OPEC on July output, which will be released on August 13.
However, the picture for crude markets remained volatile and mixed, according to analysts. On Monday, higher prices were also shaking off the escalation of the trade war between the US and China, with China expected to dramatically cut crude imports from the US in retaliation for a slate of US tariffs.
Meanwhile, US sanctions on Iran are scheduled to begin officially on Tuesday following the 180-day countdown period after US President Donald Trump officially announced the country would reimpose sanctions.
“Brent and WTI are getting off to a better start to the new week today despite the escalating trade dispute between the US and China and a firmer US dollar,” Commerzbank analysts said in a morning note. “Presumably, some market participants expect the huge drop in Iranian oil exports that is on the cards to tighten the supply situation and drive up prices.”
Saudi tankers have restarted voyages through the Bab al-Mandab strait, a critical choke point in the Red Sea, after Aramco temporarily halted all shipments following an attack last month by Yemeni Houthi militants on two VLCCs.
However, those tankers were heard to be cautious, with some attempting to hide their locations by shutting off their transponders, according to data from cFlow, S&P Global Platts tradeflow software. Yemen’s Houthi rebels called a unilateral two-week halt last week to attacks on vessels in the Red Sea.
–Katherine Dunn, [email protected]
–Edited by Jonathan Dart, [email protected]
Source: S&P Global Platts
