Iranian Sanctions Continue to Evolve
Iran, the third largest crude oil producer in OPEC, produces around 3.8 million barrels per day (mmbd) and exports around 2.2 mmbd, according to Platts. With Iranian sanctions going into effect in November, Iran crude oil exports could fall by as much as two-thirds by the end of the year. This would leave Iran exporting only 700,000 barrels per day (bpd). The U.S. predicts that exports that are still online will largely go to China while smaller amounts will go to India, Turkey, and other countries that may be granted waivers. Multiple countries including South Korea, Japan, and members of the European Union (EU) started slashing imports from Iran and confirmed that they will comply with the sanctions unless granted a waiver from the U.S. European countries import about 600,000-700,000 bpd from Iran with the key buyers being France, Italy, Spain, and Greece. These countries have already started to make moves to replace Iranian crude with oil from Iraq, Saudi Arabia, and Russia. Turkey however, will likely continue to purchase Iranian crude. Currently Turkey is a top five importer from Iran, buying close to 150,000-220,000 bpd.
U.S. Crude Oil Production Hits 11 mmbd
U.S. crude oil production surpassed the 11 million barrels per day (mmbd) mark for the first time ever. The U.S. continues to be the second largest crude oil producer behind Russia. Russia is currently producing 11.2 mmbd, as reported in early July. U.S. production increased by about 1 million barrels per day in five months since November with the shale boom being the main driver. Crude oil inventories also rose by 5.8 million barrels. On the other hand, rig counts dropped by 5 last week to 858, signaling a slowdown in production, according to Baker Hughes. Last week WTI stayed consistent at roughly $68/barrel before edging up to $70/barrel on Friday.
In Other News
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Production at the field in western Libya will fall by about 160,000 bpd as a result of the precautionary steps, the NOC said in a statement. Unidentified assailants released two of four workers it kidnapped at Sharara early Saturday but still held the other two, the company said, offering no further details about the kidnappers or their possible motives.
Ahead of his election, President Trump seeks to push down gasoline prices by tapping the Strategic Petroleum Reserve in Freeport that holds roughly 660 million barrels of oil. While doing so would in fact push prices down, there would be less oil left in the Reserve, which would effectively hinder US’s ability to combat any legitimate oil shocks in the future.
Iran’s oil exports could fall by as much as two-thirds by the end of the year because of new U.S. sanctions, putting oil markets under huge strain amid supply outages elsewhere in the world. U.S sanctions on Iran will drastically reduce Tehran’s oil exports to about 700,000 barrels a day, primarily going to China, India and Turkey.
Some in Washington now expect that China will vacuum up much of the Iranian oil that other nations won’t buy because of the threat of U.S. sanctions, according to a senior U.S. government energy official.
CSX Corporation today announced second quarter 2018 net earnings of $877 million, or $1.01 per share, versus $510 million, or $0.55 per share in the same period last year. CSX’s operating ratio set an all-time company quarterly record of 58.6 percent from 67.4 percent in the prior year or 63.5 percent on an adjusted basis, excluding restructuring charges.
Vitol Group, the world’s largest independent oil trader, is launching a new fund to invest in wind farms in Europe, joining a string of oil majors making moves into renewable energy.
Global electricity investments exceeded those in oil and gas for the second year running in 2017 due to more spending on grids but renewable energy investment fell after years of growth. Global energy investment totaled $1.8 trillion last year, down 2 percent from 2016. More than $750 billion was spent on the electricity sector, while $716 billion was invested in oil and gas supply.
As US is on its way to become a major energy exporter, some analysts anticipate a shift in pricing power to Gulf Coast – Houston. For decades, the US benchmark for oil prices has been Cushing, Oklahoma. However, with US production ramping up in recent months, crude exports rose to 3 million barrels a day, showing signs of the city’s importance in pricing and hedging.
Federal Motor Carrier Safety Administration officials have withdrawn a slate of proposed “enhancements” to the Compliance, Safety, Accountability program’s Safety Management System to make way for a small-scale test in September of a new statistical data model intended to better identify high-risk carriers.
Key buyers of Iranian crude in Europe are starting to cease imports of Iranian crude for September-loading cargoes as the first round of US sanctions on Iran kick off next month.
U.S. crude oil production last week hit 11 million barrels per day (bpd) for the first time in the nation’s history, the Energy Department said on Wednesday, as the ongoing boom in shale production continues to drive output.
OPEC will meet with lawyers in Vienna to discuss a strategy that will shield them against the NOPEC bill proposed by the US administration. NOPEC – “No Oil Producing and Exporting Cartels Act”, would open OPEC up to antitrust lawsuits, which for example would allow the US sue the cartel for manipulating energy prices.
Daimler Trucks North America is recalling more than 18,000 model year 2018-2019 Freightliner Cascadia tractors for an issue with the brake calipers, according to documents from the National Highway Traffic Safety Administration.
Saudi Arabia’s governor to OPEC said Thursday that the cartel along with non-OPEC members will not flood the market with crude adding that July exports should be on par with previous month, while August export will most likely decline by 100,000 barrels a day. Oil prices rose Friday morning following the statement.