Oil steady as Iran sanction fears face US-China trade tensions

NEW YORK: Oil prices were little changed on Monday as market participants weighed potential supply cuts from U.S. sanctions on Iran with deepening trade tensions between the United States and China that could dent global crude demand.

Brent crude futures rose 13 cents to $78.22 a barrel by 11:12 a.m. EDT (1512 GMT), while U.S. West Texas Intermediate (WTI) crude futures fell 8 cents to $68.91 a barrel.

"We believe that the full effect of the Iranian oil sanctions has yet to be seen and we feel that the next 5-6 week anticipatory phase of the official sanctions will associate with steady speculative buying interest," Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

Iran's oil exports have been falling in recent months as more buyers, including its second-largest buyer India, cut imports ahead of U.S. sanctions that take effect in November. Washington aims to cut Iran's oil exports down to zero to force Tehran to re-negotiate a nuclear deal.

"Iranian crude oil export loadings have declined by 580,000 barrels per day in the past three months," Bank of America Merrill Lynch analysts said in a note to clients.

Since spring when the Trump Administration said it would impose the sanctions, crude traders have priced in a risk premium reflecting the supply shortages that may occur when exports from Iran, the third-largest OPEC producer, are cut.

U.S. Energy Secretary Rick Perry told  Reuters on Friday that he did not expect any price spikes and that Saudi Arabia, the United States and Russia could between them raise global output in the next 18 months.

On Monday, Russian Energy Minister Alexander Novak said all possible scenarios for oil output could be discussed at a meeting of OPEC and non-OPEC states in Algeria this month.

State oil giant Saudi Aramco will spend more than 500 billion riyals ($133 billion) on oil and gas drilling over the next decade, a senior company executive said.

A leading Iranian official said on Saturday that Saudi Arabia and Russia had taken the oil market "hostage" and accused other producers of turning the Organization of the Petroleum Exporting Countries into "a U.S. tool."

Capping gains, however, was a deepening trade war between the United States and China.

U.S. President Donald Trump is likely to announce new tariffs on about $200 billion on Chinese imports as early as Monday, a senior administration official told Reuters on Saturday.

The trade dispute is raising concerns about the potential for slower growth in oil consumption, offsetting supply concerns stemming from the upcoming U.S. sanctions on Iran.

"Oil prices could see a sharp downturn if President Trump imposes additional tariffs on goods imported from China," said Abhishek Kumar, senior energy analyst at Interfax Energy in London.