US crude oil slips ahead of Trump decision on Iran

US crude oil prices have slipped back after strong gains made as the White House prepared to announce a decision on whether it will withdraw from the Iran nuclear deal. US President Donald Trump wrote on Twitter on Monday that he would announce his decision on the Iran deal from the White House at 2pm on Tuesday. The president has repeatedly criticised the agreement between the Iranians and the US and its partners. If Mr Trump opts to reimpose sanctions on Iran it would probably entail reductions in the country’s oil exports and deliver a jolt to international markets.  West Texas Intermediate, the US oil benchmark, rose above $70 a barrel on Monday for the first time in more than three years but then slipped back in Asian trading. WTI $70.84 on Monday, up 1.6 per cent for the session and the highest level since November 2014 while North Sea’s Brent grade also reached a three-and-a-half-year high of more than $76. In Asia on Tuesday, WTI was trading down 1.2 per cent at $69.87. Brent was off 1 per cent at $75.45. Iran’s oil production has bounced back to nearly 4m barrels a day since world powers eased sanctions over its nuclear programme. Reimposing sanctions could reduce Iranian oil exports by 200,000-300,000 barrels a day, according to RBC Capital Markets. Robust demand propelled by solid global economic growth, along with cuts in output co-ordinated by the Opec cartel, has diminished surplus oil stocks and left the market more sensitive to shocks. Concerns over supplies have also centred on Venezuela as economic turmoil dents its crude sales.  Venezuela’s oil production has fallen by nearly 600,000 barrels a day from a year ago due to “chronic mismanagement” inside the country, the International Energy Agency said. In a further blow, ConocoPhillips, the US exploration and production company, won court rulings at the end of last week giving it control of assets owned by Venezuelan state oil company PDVSA, raising questions about additional disruptions to the country’s exports.

The International Chamber of Commerce last month awarded Conoco $2.04bn from PDVSA in an arbitration decision as compensation for the nationalisation of stakes in its heavy oil projects in Venezuela in 2007. Conoco has been pursuing legal actions around the world to try to enforce that award, and the court orders granted it control over assets in two Caribbean islands, Bonaire and St Eustatius.  The government of Bonaire said that Conoco had on Friday taken control of the Bopec oil terminal, which is owned by PDVSA, and the oil in its tanks. Bopec is an important part of Venezuela’s oil export infrastructure, used for storage and blending of refined products and crude oil being sold to China.  Reuters reported that PDVSA had on Friday told its oil tankers in the Caribbean to return to Venezuelan waters. Conoco said that it would “pursue all available legal avenues to obtain full and fair compensation for our expropriated investments in Venezuela”.  The rising oil price is a fillip for US producers active in the Permian Basin of Texas and New Mexico. Yet a torrent of output has overwhelmed pipelines leading from the region, discounting the local price at Midland, Texas, to $13.25 a barrel against benchmark WTI, Bloomberg data showed.  “The inability to move additional quantities of oil by pipeline is having an impact on the growth trajectory,” said Andy Lipow of Lipow Oil Associates, a Houston consultancy. “The pipeline problems will not be fixed in any meaningful way until the end of 2019.”  US retail petrol prices are averaging $2.85 a gallon, nearly a fifth higher than a year ago. Pimco, the US-based fund manager, argued that the rise in oil prices will serve as a “modest headwind” to the US economy while boosting inflation.


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