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Oil prices climb as US drilling stalls and Iran sanctions loom

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Oil prices rose on Monday as U.S. drilling for new production stalled and as the market eyed tighter conditions once Washington’s sanctions against Iran’s crude exports kick in from November.

U.S. West Texas Intermediate (WTI) crude futures were at $67.96 per barrel at 0150 GMT, up 21 cents, or 0.3 percent, from their last settlement.

Brent crude futures climbed 30 cents, or 0.4 percent, to $77.13 a barrel.

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U.S. energy companies cut two oil rigs last week, bringing the total count to 860, energy services firm Baker Hughes said on Friday.

The U.S. rig count has stagnated since May, after staging a recovery since 2016, which followed a steep slump the previous year amid plummeting crude prices.

Outside the United States, new U.S. sanctions against Iran’s crude exports from November were helping push up prices.

Energy consultancy FGE said several major Iran customers like India, Japan and South Korea were already cutting back on Iran crude.

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“Governments can talk tough. They can say they are going to stand up to Trump and/or push for waivers. But generally the companies we speak to … say they won’t risk it,” FGE said.

“U.S. financial penalties and the loss of shipping insurance scares everyone,” it said in a note to clients.

U.S. rig count has stagnated since May: tmsnrt.rs/2NsKwpc

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TIGHTER OUTLOOK

With U.S. rig activity stalling and Iran sanctions looming, the oil market outlook is tightening.

“Investors have largely turned positive again … likely welcoming the return of backwardation,” said Edward Bell, commodity analyst at Emirates NBD bank.

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Backwardation describes a market in which prices for immediate delivery are higher than those for later dispatch. It is considered a sign of tight conditions giving traders an incentive to sell oil immediately instead of storing it.

The Brent backwardation between October this year and mid-2019 is currently around $2.20 per barrel. <0#LCO:>

While Washington exerts pressure on other countries to fall into line and also cut imports from Iran, it is also urging other major producers to raise their output in order not to create too strong a price spike.

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U.S. Energy Secretary Rick Perry will meet counterparts from Saudi Arabia and Russia on Monday and Thursday, respectively, as the Trump administration seeks the world’s biggest exporter and producer to keep output up.

One key question going forward is how demand develops amid the trade dispute between the United States and China, as well as general emerging market weakness.

Consultancy FGE warned that “trade wars, and especially rising interest rates, can spell trouble for the emerging markets that drive (oil) demand growth.”

Despite this, FGE said the likelihood of significantly weaker oil prices was relatively low as the Organization of the Petroleum Exporting Countries (OPEC) would withhold output to prevent prices from plunging.

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“We see $65 per barrel as a trigger for cuts,” FGE said.

Russia, U.S. & Saudi crude output: tmsnrt.rs/2NqbrBZ

Reporting by Henning Gloystein; Editing by Joseph Radford and Richard Pullin


Report typos and corrections to: [email protected].
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Millions around the world joined #ClimateStrike — demanding bold climate action

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Masses of children skipped school Friday to join a global strike against climate change that teen activist Greta Thunberg said was "only the beginning" in the fight against environmental disaster.

Some four million people filled city streets around the world, organizers said, in what was billed as the biggest ever protest against the threat posed to the planet by rising temperatures.

Youngsters and adults alike chanted slogans and waved placards in demonstrations that started in Asia and the Pacific, spread across Africa, Europe and Latin America, before culminating in the United States where Thunberg rallied.

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Trump announces new sanctions on Iran — and deploys US troops to the Middle East

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The United States announced Friday that it was sending military reinforcements to the Gulf region following attacks on Saudi oil facilities that it attributes to Iran, just hours after President Donald Trump ordered new sanctions on Tehran.

Trump said the sanctions were the toughest-ever against another country, but indicated he did not plan a military strike, calling restraint a sign of strength.

The Treasury Department renewed action against Iran's central bank after US officials said Tehran carried out weekend attacks on rival Saudi Arabia's oil infrastructure, which triggered a spike in global crude prices.

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‘Do a lot of stupid sh*t as quickly as possible’: Ambassador Power breaks down ’The Trump Doctrine’

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The former ambassador to the United Nations explained "The Trump Doctrine" during a Friday evening interview with comedian Bill Maher on HBO's "Real Time."

Samantha Power, the author of the new book, The Education of an Idealist, was asked by Maher about the foreign policy mantra of the Obama administration.

"Obama's foreign policy doctrine was famously summarized as 'don't do stupid sh*t," Maher noted. "Trump's, of course, is 'Do stupid sh*t.'"

"Do stupid sh*t as quickly as possible," Power clarified.

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