How high will oil go? Iran is the biggest X factor

Oil edges higher amid tension over death of Saudi journalist

Oil edged higher on Thursday, driven by the prospect of a shortfall in global supply once US sanctions against major crude exporter Iran come into force in just five weeks' time.

US officials have said they aim to reduce Iran's oil exports to zero in an effort to force its leaders to change their behavior in the region.

Exports have declined already to about 1.5 million barrels per day (bpd), up to 1 million bpd below levels seen earlier this year.

On Wednesday, the Energy Information Administration reported USA crude oil inventories rose 6.5 million barrels (Mmbbl) last week, the fourth consecutive weekly increase and nearly three times what analysts expected.

Iran, the world's fifth biggest oil producer, exported about 2.5 million barrels of oil per day during the first half of 2018.

"We're seeing some buying come back in", said Phil Flynn, an oil market analyst at Price Futures Group in Chicago.

The U.S. administration has been pushing its allies to cut Iranian oil imports and encouraging Saudi Arabia, other OPEC states and Russian Federation to pump more oil to meet any shortfall.

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Two takeways from Wednesday's trading activity: first, the resiliency and determination of US producers continue to undercut persistent arguments from the analytical community that American output has hit its peak and won't be able to help compensate for the loss of Iranian crude due to the sanctions.

Iran has sent a major cargo of oil to China before the re-imposition of the second round of U.S. sanctions that will be meant to target the country's oil exports.

But those who are against the idea, say once we have not still resolved the problems and weaknesses in the stock trades, how can we set up a new proper ground for offering oil in this market?

But President Donald Trump on Wednesday gave Saudi Arabia the benefit of the doubt in the journalist's disappearance, suggesting the White House may not take additional action against Saudi Arabia. "That comes after prices dropped sharply on Wednesday as USA crude stockpiles surged more than what the market had expected". Iran is India's third-largest oil supplier after Iraq and Saudi Arabia.

On May 8, President Trump pulled the USA out of a 2015 nuclear pact with Iran reached by his predecessor Barack Obama and other world powers, the U.K., France, China, Russia and Germany, and ordered tough US sanctions on Tehran.

Reuters' data confirms earlier reports from TankerTrackers.com, which repeatedly warned that Iran's oil exports have not fallen by as much as official shipping data suggests: NIOC tankers began switching off their transponders to hide their routes earlier this year.

The US dollar index that tracks the US dollar against a basket of the other currencies edged up 0.06 percent to 95.41 on Thursday and reached a fresh one-week high.

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