Oil rises on escalating U.S.-Iran tensions; trade war concerns weigh

Jeannie Matthews
May 22, 2019

Baharin is a small, Sunni-ruled island nation off the coast of Saudi Arabia.

Asked by reporters if the US was going to war with Tehran, the US President responded, "hope not", as he welcomed Swiss President Ulrich Maurerto the White House.

Falih said Saudi oil output in July would remain within its OPEC production target.

"We will definitely be responsive and the market will be supplied", Falih told Reuters.

But all indications are that inventories are still rising. He said OPEC's job "is not done yet" and that there was no need to alter the agreement in the meantime.

USA crude inventories rose unexpectedly last week to their highest since September 2017, while petrol stockpiles decreased more than forecast, data from the government's Energy Information Administration showed on Wednesday.

Oil prices jumped on Monday after Saudi Arabia indicated a possible rollover of output curbs amid political supply risks, but that support is likely to be short-lived due to fundamental changes in the energy industry, an expert said on Monday.

The United States, not a member of OPEC+ but a close ally of Riyadh, wants the group to boost output to bring oil prices down.

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Oil prices edged up on Tuesday on escalating tensions between the United States and Iran and on signs that producer club OPEC will continue withholding supply this year.

Iranian Foreign Minister Mohammad Javad Zarif predicted on Saturday that there would be no war between the USA and Iran, however he said Washington should explain to the American people about its "dangerous moves" in the region.

Even so, the committee didn't make a formal recommendation to prolong the supply curbs, concluding instead that further monitoring of the market was necessary, with a focus on managing inventories and keeping supply and demand in balance.

Venezuela's output - also subject to U.S. export sanctions - is tumbling, down by over half since the third quarter of a year ago.

As part of the OPEC+ production cuts between January and June, Russia is taking the lion's share of the non-OPEC cuts and pledged to reduce production by 230,000 bpd from October's post-Soviet record level of 11.421 million bpd, to 11.191 million bpd. Both are exempt from the voluntary reductions under the OPEC-led deal.

On Sunday, US President Donald Trump threatened the Islamic Republic once again on Twitter, saying that if the country "wants to fight, that will be the official end of Iran", despite the fact that Tehran earlier shrugged off the possibility of war in the Persian Gulf.

A top diplomat from Saudi Arabia said his country wasn't looking for war either but would defend itself against Iran if needed, a week after two of the country's oil tankers were attacked near the United Arab Emirates. The UAE has blamed no one for the tanker sabotage.

Its unclear exactly how much Iran is exporting, and so far demand for replacement crude from Tehran's customers has been lower than expected, Al-Falih said.

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