Oil dips but markets remain tight due to disruptions, record demand

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We just shared a forex trading signal to open a buy position above $71.10 with a stop below $70.85 and a target of $71.40.

Replacing Iran, which is India's third largest oil supplier behind Iraq and Saudi Arabia, will not be a problem but margins will be hit as Tehran offers the best commercial terms, another official said.

It's been a wild stretch for crude.

Brent crude futures LCOc1 were at $77.40 per barrel, down 22 cents, or 0.3 percent, from their last close. In practice, Saudi Arabia and Russian Federation will carry the biggest shares.

Saudi Arabia insisted as recently as April it was too soon to open the taps but Riyadh made a U-turn after its ally the United States called on OPEC to boost supplies.

A day before the official OPEC meeting on Friday, Iranian Oil Minister Bijan Zanganeh stormed out of a gathering of OPEC and non-OPEC allies saying there would be no agreement. The group agreed to pump more oil - but perhaps not as much as some had expected. The efforts to isolate and hobble the Islamic Republic overshadowed Saudi Arabia's plan to lift oil output to a record within weeks.

A senior State Department official said the administration is now telling European and Asian countries that the US expects their imports to hit zero by the time the grace period ends.

But analysts say the market has little spare capacity to deal with further disruptions.

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Consider that oil output has been plunging in two other OPEC members: Libya and Venezuela. The Permian Basin is grappling with shortages of talent, pipeline and supplies. The move is aimed at depriving Iran, which is increasing its influence in the Middle East, of its biggest source of funds, and drawing concessions from the country.

The EIA reported that crude exports jumped to 3 million barrels a day last week, while refinery utilization rates increased to the highest since 2005 and refinery demand for all sorts of feedstocks jumped to a record, all contributing to the crude stockpile decline.

However, the surge in output does not need to exported, at least not right away.

A Suncor spokesperson confirmed that Syncrude is not shipping any crude at this time and the facility is conducting a "comprehensive assessment" to determine when it can get back online.

Anna Belova, a senior analyst for oil and gas at analytics company GlobalData, said the OPEC-led decision to ease compliance with production arrangements was good for Russian oil companies Gazprom Neft, Lukoil and Rosneft, which have the capacity to add hundreds of thousands of barrels of oil to the market. "And as long as priority is peace and security, U.S. is going to continue to try and work with our partners, friends and allies so that we are all pushing Iran to be a good accountable global neighbour", she added. During the pre-2015 round of sanctions, countries had to demonstrate they were consciously reducing energy imports from Iran.

"This is hyper-bullish", said Mike Wittner, global head of oil research at Societe Generale.

Supply disruptions in Canada have also offered support to crude.

The US officials stated that Indian companies will have to face the same sanctions as others if they continue to engage in sanctions areas of the economy.

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