Oil prices near $80 a barrel as concern grows over global supply

Oil prices climb as Iran sanctions loom

Inventories at the Cushing, Oklahoma, delivery hub for USA crude futures, located in the PADD 2 or the Midwest, fell 1.2 million barrels, EIA said.

According to the Organization for Economic Cooperation and Development (OECD), weaker demand in Europe, Asia, as well as higher gas prices in the USA, put some downward pressure on the pace of demand growth, while shakiness in emerging markets over trade disputes and weakened currencies pose a risk to demand outlook for 2019.

Brent crude oil spot prices averaged 73 USA dollars per barrel in August, down nearly 2 dollars from July.

Light, sweet crude for October delivery dropped $1.78, or 2.5%, to $68.59 a barrel on the New York Mercantile Exchange, its worst day since August 15 after it closed at its highest level since July 20 a session earlier.

Oil markets were also eyeing Hurricane Florence offshore the United States amid surging demand for gasoline and diesel.

Iraq replaced Saudi Arabia in August as the top oil supplier to India, the data showed, as refiners turned to Iraqi barrels to compensate for a lower intake of Iranian oil ahead of the USA sanctions in November.

Oil has risen above $80 a barrel to its highest level this year amid concerns about supplies from Iran and a fall in United States stockpiles.

"We are dealing with two issues separately and our stand has been communicated to the U.S.", added the official on being questioned to whether higher American oil imports could mean replacing Iranian crude.

London-traded Brent, which is more sensitive to global supply disruptions, widened to the largest premium to the US benchmark crude in nearly three months.

USA crude futures were up 35 cents at $69.60 a barrel.

Perry will meet with Russian Energy Minister Alexander Novak on Thursday in Moscow.

"There remains a lot of noise in this week's markets, but the confluence of bullish near-term signals such as Iran sanctions, sinking U.S. crude inventories and Mideast tensions should keep oil prices supported for the remainder of the week", said Stephen Innes, head of trading for Asia Pacific at Oanda.

India's Business Line reports, a senior Indian government official was quoted saying that Indian imports of American oil should not be seen as a replacement for Iranian containers.

The increased revenues seem to have resulted from a jump in oil prices this year as well as Iran's high oil export volume during part of that period.

"We can see that the pricing situation today depends not just on the supply/demand balance or the general economic situation but also on the uncertainty that we observe today in the global markets: the trade wars, the sanctions that the USA pursues", Novak told CNBC.

US production has returned to 2014 boom levels, but the energy agency said USA output will grow more slowly next year due to bottlenecks in getting oil to markets.

In its monthly report, the cartel said total oil demand for 2018 is estimated at 98.82 million barrels a day.

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