Oil Prices Steady After Sharp Fall

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

Benchmark U.S. crude oil lost 2 cents to $66.92 a barrel in electronic trading on the New York Mercantile Exchange.

"Past instances of El Nino have resulted in sharp drops in U.S. residential and commercial heating oil demand and prices", it said.

"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.

The action, followed by another set of sanctions scheduled for November, will bring USA sanctions against Iran to the level on par with those prior to a major multilateral nuclear deal reached in 2015.

China's crude imports recovered slightly in July after two straight monthly declines, but remained low due to a drop-off in demand from smaller independent refineries.

Oil prices rose after the sanctions went into affect, but gains were limited as market participants lacked clear signs on just how much the proposed oil sanctions would affect Iranian crude output, Kilduff said.

"Without the extra Saudi oil we had in June, it's hard to crunch the numbers and get a lower price going into the end of the year", said John Kilduff of Again Capital. Exports averaged 1.85 million barrels a day last week and have a cumulative daily average for the year of 1.83 million barrels a day, a 140% increase over the year-ago export total. It fell 3.2 per cent to $72.28 a barrel in the previous session.

The White House said in a statement Monday that the United States will reactivate a slew of sanctions on Iran's financial and industrial sectors beginning on Tuesday.

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Beijing has put U.S. energy products, including crude oil and refined products, on lists of goods it will hit with a 25 per cent import tax in retaliation for similar moves by Washington.

French bank Societe Generale said there was now a "comfortable supply" in physical crude markets, but noted "Iran sanctions will take another one million bpd off the markets". All countries must stop importing Iranian oil by then, the State Department said in June, or face sanctions.

"We envisage that Iran views its threat to close the Strait of Hormuz, per se, as in fact more advantageous than its actual execution as closing the Strait has a regressive impact on Iran's interests as more than 80 per cent of Iran's oil exports pass through these narrow waters, and thus Iran will be cutting off its own economic lifeline", said Khoman. Where these trade tensions threaten the volume of China's import of USA crude oil. It also gives American producers greater inroads to the fastest-growing oil consumer, a market that's now dominated by Middle-Eastern suppliers.

U.S. President Donald Trump tweeted that the sanctions were "the most biting sanctions ever imposed".

Beyond the sanctions, the oil market was focusing on the US market, where the American Petroleum Institute said on Tuesday that crude inventories fell by 6 million barrels in the week to August 3 to 407.2 million.

The US dollar index, which measures the greenback's strength against a basket of other currencies, was lower 0.2 percent at 94.87 on Wednesday.

"Fears of the impact of sanctions on China, Iran, Russia and Turkey did not help and another big drop in USA gasoline demand has some anxious that U.S consumers were showing resistance to higher pump prices", Phil Flynn, a market analyst at the PRICE Futures Group in Chicago, said in a daily emailed market report.

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