Oil Stumbles on U.S. Stockpile Worry and Saudi Production Pledge

US Treasury in Talks Over Disconnecting Iran From SWIFT Amid Sanctions                AFP 2018

The kingdom, which produces more than a tenth of global supplies, had vowed on Monday not to withhold its output as a political weapon amid the worldwide backlash over the murder of journalist Jamal Khashoggi.

Harsh, but with the deal maker in the White House, if the United States has a reason to squeeze Saudi Arabia to bump up production and keep a lid/lower crude oil prices, this is the time.

Falih's statement showed that longer-term co-operation between OPEC and Russian Federation is on the cards in a bid to keep the market adequately supplied post-Iran sanctions, and to offset any imbalances in supply and demand that could come into play as the USA cranks up production and export volumes.

Top U.S. lawmakers turned their ire on Saudi Crown Prince Mohammed bin Salman on Sunday and said they believed he ordered the killing of Khashoggi, although the administration of U.S. President Donald Trump maintained a more cautious stance. Washington is largely depending on Saudi Arabia to fill the gap left by the loss of the Iranian barrels.

However, Saudi Energy Minister Khalid al-Falih said on Monday the country has no intention of cutting back oil supply.

Since that agreement, oil prices have more than doubled and were now hovering at just under $80 a barrel.

The United States has recently hinted that it was at least considering waivers, but U.S. Treasury Secretary Steven Mnuchin said over the weekend that it would be more hard for Iranian oil customers to get waivers from the sanctions than it was during the Obama administration, and the U.S. would issue waivers, if any, only to buyers that have significantly reduced Iranian purchases.

US light crude dropped $3.03, or 4.4 percent, to $66.33 a barrel, after earlier hitting a two-month low at $65.74. Riyadh has refrained from using oil as a direct weapon since then. If US crude drops below $US65, a psychologically important figure, that could trigger further technical selling, traders said. "We work to stabilise global markets and to facilitate global economic growth", he added.

J.P. Morgan said it raised its 2019 Brent price forecast by a whopping $20.50 per barrel to $83.50 saying this "bullish argument is strongly driven by tighter supply due to Iranian sanctions and declining spare capacity".

The oil market has been concerned that Saudi Arabia might cut crude supply in retaliation for potential sanctions over the killing of journalist Jamal Khashoggi.

"The big unknown is how much Iranian oil will be off the market and we'll know in about a month's time".

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