Oil falls as concern grows over Chinese refinery demand

  • Oil falls as concern grows over Chinese refinery demand

Oil falls as concern grows over Chinese refinery demand

"We believe that any cutback in China's crude oil imports from the US due to US-China trade tensions will see more US crude cargoes heading towards Europe, India and Southeast Asia", Lim Jit Yang, director for Asia at S&P Global Platts Analytics, said.

Meanwhile, U.S. sanctions on Iran would take effect at 12:01 AM ET on Tuesday, following President Donald Trump signing an executive order to reimpose sanctions on Iran's energy sector.

A first batch of USA sanctions against Iran, which shipped out nearly three million barrels per day (bpd) of crude in July, officially came into effect Tuesday.

Oil prices held steady on Wednesday, supported by a report of rising U.S. crude inventories as well as the introduction of sanctions against Iran. The sanctions, which would come into force from November 4, are likely to block current payment routes used to pay for Iranian imports.

Iraqi Prime Minister Haider al-Abadi said his country opposes sanctions on Iran, but will abide by them to protect its own interests.

Discussion around possible waivers from the U.S. for some importing countries were still floating around the market, resulting in uncertainty about the impact the Iranian sanctions will likely have, analysts said. That is fast changing as Iran seeks to maintain deliveries to Turkey amid US sanctions.

West Texas Intermediate (WTI) crude for September delivery traded at $68.83 a barrel on the New York Mercantile Exchange, down 18 cents, at 9:05 a.m.in Tokyo.

Many European countries, China and India, oppose the sanctions, but the US government said it wants as many countries as possible to stop buying Iranian oil. China's foreign ministry on Wednesday stated that Beijing will continue its business with Iran as does not violate any UNSC resolution.

Observers have dismissed Trump's call for Saudi Arabia to abruptly increase oil production as political "noise".

In terms of production, the EIA on Tuesday slightly cut its 2018 expectation for average 2018 USA crude output to 10.69 million bpd, down from its previous estimate of 10.79 million bpd.

The Vienna conference on 23 June 2018 decided the oil-producing would endorse a normal output rise of one million barrels crude oil each day.

"Even before their implementation, these proposed (Chinese) tariffs are starting to have an impact, with Chinese imports of USA crude falling by 70 percent from April to July", Goldman Sachs said in a note on Wednesday.

On Friday, crude oil futures ended down $0.47, or 0.70%, at $68.49 a barrel, after data showed oil output in Russian Federation to have increased sharply by 150,000 barrels per day in July, compared to a month earlier. Weekly data from the American Petroleum Institute for USA inventories is due later on Tuesday at 4:30 p.m. EDT, followed by the EIA's report on Wednesday morning.

Analysts have cautioned that a global heatwave could affect oil demand. In addition to crude oil and liquified natural gas, other listed products include diesel, coal, chemicals, cars, steel products and medical equipment.

This is not about bombarding the market with oil and pushing the price into the $50s, it is about preparing the market and easing the transition, he said.

This is unedited, unformatted feed from the Press Trust of India wire.