Oil Plunges to almost 7-Week Low amid US-China Trade Tension

Saudi Arabia Crude Flows to U.S. Surge While Venezuela Output Declines

Saudi Arabia Crude Flows to U.S. Surge While Venezuela Output Declines

Concerns over recent figures from Chinese crude oil exports have been weighing on traders' sentiment, although the descent should be somewhat tempered by rising speculations of further U.S. sanctions against Iran.

US crude stocks fell last week, while gasoline and distillate inventories rose, the Energy Information Administration said on Wednesday.

Saudi Arabia will probably want to ensure that output decisions remain attributed to OPEC or OPEC+ rather than assume sole responsibility or joint accountability with Russian Federation, which is not a member of the Organization of the Petroleum Exporting Countries. On the other hand, a reduction in supply as a result of USA sanctions on Iran (which will reduce supply), is providing support on moves lower. Oil production is down 45.8% to 1.3 million barrels per day since the end of 2015.

Markets were still supported by the introduction of new USA sanctions against Iran on Tuesday, which initially target Iran's purchases of US dollars - in which oil is traded - metals trading, coal, industrial software and its auto sector. From November, Washington will target the petroleum sector in Iran, the No. 3 producer in the Organization of the Petroleum Exporting Countries.

At the same time, President Donald Trump restored some American sanctions on Iran and has reaffirmed plans to impose tougher penalties on the nation's oil sales in November.

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On Friday, the Houston-based Baker Hughes reported that the number of active drilling rigs in the United States decreased by four to 1,048.

Just when you thought the renewed sanctions on Iran were already priced into the crude oil market, there are signs today that this may not be the case.

"Gasoline demand has been one of the main bullish stories in the oil market and if that demand is slipping off a little bit, maybe we're seeing reluctance to higher prices", says Phil Flynn of Price Futures Group.

According to OPEC sources, top crude exporter Saudi Arabia pumped around 10.29 million barrels per day (bpd) of crude in July, down about 200,000 bpd from a month earlier.

In America, customs will begin collecting duties on 279 product lines of Chinese goods as of 23 August, the US Trade Representative's Office said Tuesday.

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The dollar index.DXY was trading 0.2 percent lower. We will monitor this week's figures for another increase in inventory levels which could see oil prices move lower.

US crude stockpiles were also expected to have dropped last week.

Analysts have cautioned that a global heatwave could affect oil demand.

This mostly impacts demand for power fuels such as thermal coal and natural gas. "The key to future global demand growth, and therefore, the underlying commodity price, is China and so to the extent that you're seeing noise around that, you're going to get softness in the crude market".

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