Economy

How will US sanctions on crude oil from Iran affect India?

How will US sanctions on crude oil from Iran affect India?”

Oil prices fell on May 9 as investors anxious the United States and China could fail to reach a trade deal ahead of a Friday deadline, resulting in higher USA tariffs on Chinese imports that could hit economic growth and crimp crude demand. U.S. West Texas Intermediate (WTI) crude futures settled down 42 cents at $61.70 per barrel. Experts also believe that Iran will be re-opening and using more of its illicit oil channels to keep oil trade and continue getting some revenues from its most precious export commodity.

Benchmark Brent was down 18 cents or 0.3 percent at $69.70 per barrel.

United States crude oil stocks fell by 4 million barrels in the week to May 3, the Energy Information Administration said on Wednesday. "Part of the oil is also likely to have gone into building up stocks before the tougher USA sanctions came into force against Iran".

"It's why OPEC is being a bit stingy with barrels", Kilduff said, referring to output cuts by the Organization of Petroleum Exporting Countries and allies including Russian Federation. That is an 11 percent rise from the same month previous year.

Imports amounted to 43.73 million tons of crude or 10.64 million barrels per day (bpd), customs data showed.

The trick for Saudi Arabia is to grab as much of Iran's business as it can - delivering a blow to its adversaries in Tehran, pleasing the United States, and making a great deal of money all at once - without increasing production enough to disrupt OPEC unity, prompting other members to increase production as well, and triggering another oil glut that sinks prices.

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Helping to underpin prices on Wednesday was a report from the Energy Information Administration (EIA).

"The supply uncertainty is what's holding the (U.S. oil) market above $60 a barrel", said Phillip Streible, senior market strategist at RJO Futures in Chicago.

The EIA forecast output in 2020 will rise by 930,000 bpd to 13.38 million bpd, a bigger increase than it previously estimated.

Bank of America Merrill Lynch said it expected Saudi Arabia "to bring back oil production slowly as Iranian barrels exit the market", adding that it expects Brent to have a floor at $70 a barrel in current market conditions.

Finally, for 2020, the EIA forecast US output will average 13.38 million bpd, making the United States the world's biggest oil producer ahead of Russian Federation and Saudi Arabia.



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