Fear of demand fall-off hits oil price

Fear of demand fall-off hits oil price

It is that second round that will have a greater impact on Iran's oil and gas industry.

Net U.S. crude imports fell last week by 358,000 barrels per day. Traders are trying to establish a new balance point in the market. Its 50% to 61.8% retracement zone is $67.99 to $66.81.

Not just China but Russian Federation too is determined to continue oil and gas trade with Iran. The markets will turn weaker if the tariff damage starts to show up in US inventories numbers, but since Chinese refiners had been limited buyers since early July, it may not show up in the numbers for weeks.

On Tuesday, Brent was trading up $0.52, or 0.71%, in London at $74.27/Bbl at 11:31 a.m. DST. Its retracement zone at $72.33 to $70.67 is now being tested.

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EIA reported a draw of 1.35 million barrels of crude oil inventory for the week ending August 3, which was lower than market's expectation of 3.1 million barrels draw.

"It's certainly going to impact on movement between the USA and China, making it less efficient, meaning pressure on prices here", said Andrew Lipow, president of Lipow Oil Associates. "Crude oil and refined products affected by additional duties will reduce their competitiveness in the Chinese market".

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

Also weighing on prices, the U.S. Energy Information Administration reported that crude inventories fell just 1.4 million barrels in the latest week, less than half the 3.3 million barrel draw analysts had expected.

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Gasoline stocks rose by 2.9 million barrels, compared with analysts' expectations in a Reuters poll for a 1.7 million barrel drop. The global benchmark crude traded at a $5.82 premium to WTI for the same month. On the other hand, a breakout of $69.60 (10-day sma) could aim for $70.56 (high Aug.6) and then $71.39 (high Jul.30). At that time, Beijing threatened a 25 percent tariff on US crude imports, although it did not issue a specific date for the move. If they erode confidence in demand enough then support is likely to continue to erode until buyers find value. Investors fear any slowdown in the world's two largest economies would slash demand for commodities. Trading volumes in crude oil have been particularly high on days when it has sold off.

India has asked refiners to prepare for a drastic cut or even zero imports from Iran after the United States withdrew from the 2015 nuclear deal and announced a renewal of sanctions on Tehran.

Futures for September delivery lost 1.1% to 517.7 yuan a barrel on the Shanghai International Energy Exchange, after falling 2.6% on Wednesday. It also gives American producers greater inroads to the fastest-growing oil consumer, a market that's now dominated by Middle-Eastern suppliers.

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