The announcement of China’s relatively weak crude oil import data has led to a drop in oil prices. However, oil markets are still supported by a drop in US crude inventories and sanctions on Iran. Brent crude fell 15 cents, or 0.2 percent, to $74.50 per barrel. US crude futures were down about 2 cents, trading at $69.15 a barrel.
China’s crude oil imports rose slightly in July after falling in the previous two months, but remained the lowest level since the beginning of 2018 as demand from independent refineries declined. Markets are, however, still supported by new US sanctions on Iran on Tuesday, initially targeting Iran’s purchases of the USD used in the oil trade, as well as its dealings in metals, coal, industrial software and the automotive sector.
US oil sanctions on Iran began officially on Tuesday evening, which exported 3 million barrels last July. Senior oil market analysts believe there is enough room in the crude market for now, but sanctions on Iran would produce an additional 1 million bpd of supplies. This will also leave the markets with no surplus production capacity available and ready to face any sudden supply disruptions.
Others believe that the introduction of US sanctions on the Iranian oil sector is a step that has wide implications for the oil market, especially during the crucial period of the next three months. All Iranian oil buyers must make sharp cuts to show compliance with US decisions in order to prevent their exposure. For similar penalties. Some have already started demanding some exemptions for certain countries, but the US administration has shown clear restraint in applying sanctions.
It was clear that the beginning of the US sanctions on Iran led directly to a large collapse of the Iranian currency, and impose prohibitions on Iran’s purchase of the dollar and the circulation of minerals and that the next will be worse if the conflict is not contained. Russia has indicated that it can continue to raise production levels to secure global oil supplies, as well as to compensate for the current deflationary crises in Venezuela, the impact of the Iran sanctions and the frequent interruptions in the North Sea, Libya, Nigeria and Angola.
Investors are now following developments in the market, particularly with regard to the oil supply situation, as we’ll likely continue to see a strong growth in demand, which will lead to the need to stimulate investment led by Saudi Arabia and Russia and make larger increases. The drop in supply could outweigh the current expectations that were put in place when US sanctions against Iran began.
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