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Oil, Gas, Petrochemical and Energy Field Specialized Channel
Oil, Gas, Petrochemical and Energy Field Specialized Channel
Oil, Gas, Petrochemical and Energy Field Specialized Channel

Oil Price Drops to $83 on Signs of Iran’s Exports

Concern that the U.S.-Chinese trade war could slow down economic growth and hit oil demand also weighed on the market.

 

Oil price fell yesterday by 65 cents to $83.51 per barrel against $86.74 (four-year high) recorded at the close of the market last week.

This came as the Central Bank of Nigeria, CBN, said that it does not see the price of oil falling below $80 a barrel this year and expected to keep monetary policy tight until inflation returns to its target.

On the fall of crude price, oil watchers likened the cause on expectations that some Iranian oil exports will keep flowing despite U.S. sanctions, easing a strain on supplies. U.S. sanctions will target Iran’s crude oil exports from Nov. 4, and Washington has been putting pressure on governments and companies worldwide to cut their imports to zero.

Oil money “This is one of the single biggest supportive factors for crude,” said analysts at JBC Energy of the U.S. re-imposition of Iran sanctions. “Having said that, it may well be that we are already in the most supportive phase coming from this change and the effect will soon begin to ease.”

Oil also dropped as investors focused on rising output from other producers, such as top exporter Saudi Arabia, to compensate for lower Iranian supplies. Saudi Arabia said last week it plans to raise production in November from October output of 10.7 million barrels per day (bpd), indicating Riyadh will be boosting its supply to the highest ever level. “Chatter that Saudi Arabia has replaced all of Iran’s lost oil” is weighing on prices, said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.

 Concern that the U.S.-Chinese trade war could slow down economic growth and hit oil demand also weighed on the market, traders in Asia said. Chinese equities fell sharply on Monday.

 Meanwhile, Governor, CBN, Godwin Emefiele, explained that price of crude will not fall below $80 a barrel this year. Making this projection in an interview with Reuters at the World Bank Conference in London, he stated that so long as U.S. sanctions take effect on Iran in November, “I do not expect the price to close less than $80 this year.” On Nigeria’s interest rate, he said, “The current state of tightening will continue until at least we see inflation attaining those levels that have been set as a target.” He noted that Nigeria would continue to intervene to support its exchange rate, although he noted the pressure on the bank and the country’s currency reserves had been less than those on other emerging markets. “We will continue to intervene,” he said. “We believe in a stable exchange rate regime.”

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