Oil prices pulled down by global stock market plunge

Jermaine Castillo
October 26, 2018

Iranian Oil Minister Bijan Namdar Zanganeh shrugged off United States plans to drive the country's crude exports down to zero, saying the Islamic Republic's oil exports can not be stopped. US sanctions on Iranian oil begin on November 4 and Washington has said it wants to stop all of Tehran's fuel exports.

One of the biggest concerns for the oil market is demand.

"We think that demand will start dropping off as we approach year-end in accordance with regular seasonal patterns", he said at a meeting in Vienna, according to Reuters.

Last month, the price of crude oil rose sharply as investors braced for low supplies after Iran's oil is cut off.

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The minister reiterated that the market is unable to find a replacement for Iran's oil, urging Trump to abandon his plan to impose sanctions on the country. "Trump can not reach his objective", he told reporters at a weekly press conference in Tehran on October 15. Halting oil Iranian imports means its many refiners will have to seek alternative supplies elsewhere.

Treasury Secretary Steve Mnuchin said Sunday that it would be more hard than before for countries to get sanctions waivers.

Recent moves in Brent crude illustrate this contradiction.

Iran's concerns do not seem to be unfounded considering Iraq and Saudi Arabia have substantially increased their crude oil production in the third quarter (July-September) of the current calendar year. In addition, the gain in USA crude inventories is adding to bearish sentiment, he added. This was much higher than the 3.9 million barrels that traders were expecting.

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Oil fell near the lowest level in 2 months as a rout in US stocks prompted investors to flee risk assets and as American crude inventories continued to rise.

OPEC and its 10 non-OPEC partners, led by Russian Federation, have surpassed their aim stated at their meeting in June of raising production by a combined 1 million barrels per day from May levels. Over the past four weeks, crude oil imports averaged about 7.7 million barrels per day, 0.7 percent more than the same four-week period a year ago.

Traders brushed off a report showing rising inventories at Cushing, Oklahoma, the delivery hub for USA crude futures.

Uncertainty over future Iranian exports remains high.

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According to the forecasts of the OPEC Secretariat, the following year, production in non cartel countries to increase by 2.2 million barrels per day, while world demand will grow by only 1.5 million barrels.

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