The effects of Federal Reserve and U.S. sanctions on the oil industry

Oil prices decreased on the first day of the month. Price of Brent crude oil, which is the international benchmark decreased by 85 cents to $64.20 a barrel. West Texas Intermediate (WTI) crude oil is in a similar position as the price fell by 89 cents to $57.69 a barrel. There are many reasons which influence oil prices. One of the major factors which contributed to the falling of the oil prices is the Federal Reserve’s decision. Fed decided to cut the interest rate for the time in more than ten years.  Another reason is that due to U.S. oil production, there is no shortage of this commodity.

U.S. crude stockpiles continue to decrease for seven weeks in a row. It reached the lowest level since November. This happened even though oil production increased after Hurricane Barry. Also, oil imports are on the rise, but these measures were not enough to reverse the trend.

According to the Energy Information Administration (EIA), crude stockpiles reduced by 8.5 million barrels. This happened in the week, which ended on July 26. It is essential to mention that analysts expected that crude inventories would decrease by 2.6 million barrels. However, the total amount of crude stockpiles stand at 436.5 million barrels, which is at the five-year average during this time of year.

At the same time, as mentioned above, daily oil production reached 12.2 million barrels per day. It means in comparison with the previous week oil production increased by 900,000 barrels.

Gasoline stocks also decreased by 1.8 million barrels, which exceeded the expectations. As analyst expected that gasoline stock would decrease by 1.4 million barrels.

Distillate stockpiles including diesel as well as heating oil decreased by 894,000 barrels. According to the expectations, distillate stockpiles would increase by 1 million barrels, when the latest data shows that it decreased by 894,000 barrels.

Iranian and Venezuelan oil industries

Both of these countries are trying to cope with economic problems, but what they have in common is the U.S. sanction. The oil industry is crucial for Venezuela and Iran as it is one of the primary sources of income for both of them. In this situation, when oil exports decreased, it is harder for their governments to deal with sanctions imposed by the U.S.

For example, let’s have a look at the Iranian oil industry. There is various information about Iranian oil exports, but what is clear is that oil exports decreased in 2019. According to the Refinitiv which tracks shipments based on vessel tracking. Based on their information, Iran exported around 120,000 barrels per day.

Another source claims that exports decreased to 100,000 bpd. Tracking service TankerTrackers.com provided different information they think that Iran exported between 500,000 to 1 million bpd in July. Samir Madani is the co-founder of this website. He thinks that ships which transport Iranian oil are trying to avoid sanctions by turning off the Automatic Identification System. This method makes it harder to identify the total amount of Iranian oil exports.