The American Petroleum Institute was said to report that USA inventories dropped by 4.51 million barrels last week, and a Bloomberg survey also estimates a decline. The announcement sent oil prices soaring, and markets have been on edge since. "Don't forget the one negative to the Iran deal is that you lose a lot of oil, and they [the Saudis] got to make up for it", Trump said on Fox.
There seems to be great uncertainty about how much oil will be added to the supply side of the market, said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut, referring to how much Saudi Arabia's spare capacity will be able to offset shortages around the world.
A source last week told Reuters Saudi Arabia produced 10.8 million bpd in June and it aimed to pump 11 million bpd in July.
Iran has vowed to thwart U.S. efforts to block its oil exports by allowing private companies to export crude oil. Gasoline and distillate stocks, which include diesel and heating oil, were also down, the API said. He said he expects European countries to unveil a package of measures in the coming days created to keep the deal alive.
Oil held near US$74 a barrel amid estimates that U.S crude inventories declined for a fourth week, compounding concerns that global markets are growing increasingly tight. Rising gasoline prices could create a political headache for Trump before November mid-term congressional elections by offsetting Republican claims that his tax cuts and rollbacks of federal regulations have helped boost the USA economy. An increase in global production would typically be expected to ease prices. But with inventories already below five-year averages and little spare capacity available, oil markets look set to tighten.
US President Donald Trump on Saturday said Saudi Arabia's King Salman had agreed to his request to increase oil output "maybe up to" two million barrels.
OPEC together with a group of non-OPEC producers led by Russian Federation started to withhold output in 2017 to prop up the market. "It all kicked off at the weekend with Trump claiming the Saudis had agreed to an extra 2m barrels a day which is physically impossible, they just can't do that", he said. The two main importers of Iranian crude are China and India; both of whom import around 400,000 BPD now. These sanctions will include targeting Iran's energy sector and petroleum-related transactions, and transactions with the central bank of Iran.
"Saudi Arabian supply increases are largely compensating for production losses and instability in key producer countries", said John Driscoll, chief strategist at JTD Energy Services Pte, who has spent more than 30 years in the oil trading industry in Singapore.
State Deparment's Hook says any sort of waiver or similar moves would reduce pressure on Iran.
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