"If such procurements don't go smoothly, it could adversely affect crude oil supply and cause problems such as rises in the prices of oil-related products", said Hideo Kumano, chief economist at The Dai-ichi Life Research Institute.
On June 26, the American Petroleum Institute (API), which collects information on a voluntary basis, reported a 9.23 million barrel drop in inventories.
The increase, if it can be pulled off, would be an incredibly rapid ramp up in output, up more than 1 million barrels per day (mb/d) from May levels.
The move follows a decision by the Organization of the Petroleum Exporting Countries last week to increase production to try to moderate oil prices that have rallied more than 40 percent over the a year ago.
Yesterday's announcement by the US State Department that the US expected its allies to stop all imports of Iranian crude by November may well have been created to ramp up the pressure on the Iranian regime, but it is also likely to exert further upwards pressure on US prices, which are already close to levels last seen back in 2014, and their May peaks.
As the Donald Trump administration declared November 4 as the last day to stop oil imports from Iran, India indicated that it would fully ensure energy security for the United States when the U.S. deadline nears. "Maintaining close ties with Iran, which is rich in oil and natural gas, contributes to the national interests of resource-poor Japan", said a senior official of the Economy, Trade and Industry Ministry.
West Texas Intermediate crude for August delivery climbed $2.23 to settle at $72.76 a barrel on the New York Mercantile Exchange.
Supply disruptions in Canada have also offered support to crude. Add in smaller contributions from elsewhere and global spare capacity might only amount to 2 mb/d of supply as of July, or only about 2 percent of total global production.
The article in The Wall Street Journal reports that banks' reluctance to deal with Iran is already taking its toll on Tehran's oil exports.
Unless demand falls back, or some of these outages dissipate, oil prices could be heading much higher.
At the current rate for Urals, the Russian benchmark for the price of oil, the extra barrels pledged b Novak would yield about $12 million per day.
"The country's demonstrated ability to regulate its crude production makes it a key partner to Saudi Arabia in responding to global over-supply conditions", she said in a statement emailed to UPI. The move is most likely in anticipation of the US sanction on Iran that will severely tighten global supply, even though it was announced ahead of the State Department Action.
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