September U.S. West Texas Intermediate crude oil futures oil is poised to finish the week about 2.40 percent lower with most of the week’s loss attributed to a steep one-day sell-off on Wednesday. The move was fueled by the escalating trade dispute between the United States and China. Traders fear that additional tariffs from China will lead to lower demand. Furthermore, investors are watching key domestic data from China for further indications of slowing demand.
Uncertainty over Iranian Sanctions
Helping to limit losses are worries that renewed U.S. sanctions against Iran will tighten supplies.
Bullish investors are holding out hope that the Iranian sanctions have not been fully priced into Brent, leaving room for a significant run-up in prices after November 1 when the full effect of the sanctions begin to take place.
Between now and then, the U.S. will use tactics to try to convince all nations to comply with its sanctions. With several major buyers of Iranian crude oil still not complying with the U.S. orders, there is still uncertainty as to how much oil will be removed from the market. Currently, analysts expect the drop-off in Iranian crude exports to range between 500,000 barrels per day (bpd) and 1.3 million bpd.
Fresh IEA Warnings
Besides the Iranian sanctions, which affect supply and the potential for lower demand, traders on Friday are also reacting to the latest monthly report from the International Energy Agency (IEA).