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Expert: Iranian Sanctions, Trump Demands Make For 'Murky' Oil Market

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Expert: Iranian Sanctions, Trump Demands Make For 'Murky' Oil Market

The oil market is entering a difficult environment, with President Donald Trump demanding that OPEC and major oil-producing nations increase supply, according to S&P Global Platts writer Herman Wang. This comes just weeks ahead of a new round of sanctions against Iran that lower the global supply of oil, he said. 

What Happened

The oil market is in a "murky" environment, as Trump's demands to OPEC members come ahead of his own administration's Iranian sanctions taking effect in November, Wang told CNBC Friday. This could further tighten the oil market, as the world could see a decrease of 1.7 million barrels per day of Iranian crude supply, he said. 

Multiple countries are already "shying away" from buying Iranian crude ahead of the sanctions, Wang said. According to Saudi Arabia, there is no reason to be concerned, as the oil market is in an "OK situation," Wang said — although the country has also signaled it will increase production to make up for some of the tightness.

Why It's Important

Saudia Arabia claims it has 1.5 million barrels per day of spare capacity that can be added to the global oil market if needed, Wang said. Yet the country's current oil production of 10.4 million barrels per day is just short of its all-time high of 10.7 million barrels, so the sustainability of a production rate of nearly 12 million barrels per day will naturally be questioned, he said. 

What's Next

Despite some near-term concerns in the oil market, there could be relief next year, as demand growth is expected to ease and non-OPEC supply, especially from the U.S., should come online, Wang said. "Some market weakness" could come into play in 2019, he said. 

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