Oil rises above $74 on report of USA inventory drop, Iran sanctions

China Shipowners Shunning Iranian Oil as U.S. Sanctions Near

While the trade conflict between Washington and Beijing darkens the economic outlook, the supply versus demand outlook for oil markets remains relatively tight especially because of the looming USA sanctions against Iran, which will target oil exports.

The key problem that India is wrestling with is that during the Obama administration sanctions on Iran, "significant reductions" in oil imports from Iran amounted to a 20 percent reduction every six months.

Oil is poised for its first weekly gain in two months as shrinking U.S. crude inventories, a strike in the North Sea oil and gas fields and looming sanctions on Iran point to tighter supplies.

The American Petroleum Institute, an industry group, late Tuesday released data showing a 5.2 million barrel decline in US crude oil stockpiles for the week ended August 17.

Iran, a member of the Organization of the Petroleum Exporting Countries (Opec) and Opec's third-largest oil producer, said earlier this week no other Opec member should be allowed to take over its share of oil exports. US West Texas Intermediate (WTI) crude futures were at $68.08 per barrel, up 25 cents, or 0.3 per cent.

Worldwide markets were weaker as the ongoing trade spat between the United States and China was seen as a drag on economic growth.

"Investors remain cautious as Wednesday's surprise gain in USA stockpiles remained fresh in their minds", the bank said on Friday.

More news: Kerala Rains: Focus shifts to rehabilitation as floodwaters recede

"We expect that by Q4 the market will be dealing with either undersupply, dwindling spare capacity - or both", it added.

In options activity, December 2018 puts for oil at $50 a barrel traded, though the volume was thin with just a few hundred contracts exchanged, said Bob Yawger, director of futures at Mizuho in NY.

A key index of the dollar versus a basket of other currencies.DXY fell on Friday, boosting the price of oil and other dollar denominated commodities. "The fundamental picture is tighter than it was a year ago".

“This week's report was bullish for crude, ” said Societe Generale oil analyst Michael Wittner.

Oil prices rose 3%, with Brent crude futures hitting a three-week high.

It is interesting to note that the USA oil rig count (an indicator of future oil production) has been flat in the past two months.

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