Published: Thu, July 12, 2018
Economy | By

Crude Oil Benchmark Brent Sees Biggest One-Day Fall In Two Years

Crude Oil Benchmark Brent Sees Biggest One-Day Fall In Two Years

With the sanctions on Iran's oil exports and its central bank about to take effect on November 4, US Secretary of State Mike Pompeo said on Tuesday that his country may grant oil sanctions waivers to countries seeking relief from the measures.

Wednesday's sell-off started after the announcement by Libya's National Oil Corp that it would reopen four export terminals that had been closed since late June, shutting most of the country's oil output. China is a top buyer of USA crude, and has said it could tax US oil if trade tensions escalate. The report boosted hopes of rise in oil supplies in coming days, even as data released by U.S. suggested that crude oil stockpiles fell by more than 12 million barrels last week.

Oil prices suffered steep falls on Wednesday after Libya said it would boost supply, even as investors fear that trade tensions will hit demand. This was the biggest price slide in almost two years.

China and India, the world's second and third largest oil consumers, could face "major challenges" in finding alternative crude oil following the drop in Iranian and Venezuelan exports, the IEA said. Firstly, if the new list of tariffs on China are eventually imposed then China could turnaround and tax US oil. "In turn, this could have a marked impact on oil demand growth".

Secondly, the recent rally was being supported partly from a drop in Libyan output.

Libyan oil production fell to 527,000 barrels per day (bpd) from a high of 1.28 million bpd in February following the port closures, the NOC said on Monday.

Iraq, which is also chronically restive, does not have spare capacity either, leaving most of the job of hiking OPEC production to Saudi Arabia, the United Arab Emirates and Kuwait.

US crude futures climbed above $75 a barrel on July 3, the highest since late 2014, prompting criticism from Trump that OPEC should do more to moderate prices.

Finally, we have to continue to expect production from Saudi Arabia, Russia and the rise.

World markets remain vulnerable as the Trump administration seeks to choke off Iranian crude exports after the president quit an accord that polices the Islamic Republic's nuclear program.

The selling pressure intensified as trade tensions between the USA and China raised concerns about demand.

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