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Oil dips on signs of ample supply despite OPEC cuts, Iran sanctions

16 May 2018

Oil inventories in the world's richest nations, the most transparent and easy to track, have now fallen 1 million barrels below the five-year average, the level targeted by the Organization of the Petroleum Exporting Countries and its partners, as the group restrains crude output for a second year.

With renewed US sanctions looming against OPEC-member Iran and oil demand strong, analysts said crude markets will likely remain tight for much of the year. China's crude oil imports in the first quarter increased by 7 percent on the year to around 9.09 million bpd-a rise of nearly 595,000 bpd on average compared to Q1 2017, according to Reuters calculations.

"For now, the rapidly changing geopolitical landscape will move the attention away from stocks as producers and consumers consider how to limit volatility in the oil market", the agency stated.

Refinery runs in March also jumped to a record as import quotas for the small independent refiners-the so-called "teapots"-were increased and refinery margins stayed healthy".

Torm operates 79 oil product tankers worldwide.

At the same time, China's domestic crude oil production has been languishing near June 2011 lows in the first quarter this year, prompting higher imports to meet growing demand. China's refinery runs rose almost 12 percent in April from a year earlier, to around 12.06 million barrels per day, marking the second-highest level on record on a daily basis, data showed. Steady refining margins and backlog cargoes to some independent refiners contributed to the record import volumes.

On the supply side, Iran's impact on the global oil market has yet to be quantified or seen.

The recent decision by US President Donald Trump to withdraw from the Iran nuclear agreement has raised fears that renewed sanctions by Washington could severely hit production from the Middle East state, which now produces 3.8 million bpd and exported 2.6 million bpd last month - making it Opec's third-largest supplier.

Crude sticking to highs as USA withdrawal from Iran program continues to boost prices.

"In these early days, there is understandable uncertainty about (the) potential impact on Iran's oil exports" from the USA move, it said.

Another possible risk to the global oil supply could come from crisis-hit Venezuela, the IEA said.

"The commitment of Saudi Arabia and the rest of OPEC to the production cuts is a major factor in supporting the price at the moment as well as the possibility of reduced exports from Iran due to sanctions", said William O'Loughlin, investment analyst at Rivkin Securities.

Oil dips on signs of ample supply despite OPEC cuts, Iran sanctions