Crude oil futures ended higher on Friday with investors weighing the possible impact of US sanctions on Iran's oil exports on crude supply in the market.
Dalian typically receives between 1 million and 3 million barrels of Iranian oil each month, according to data that dates back to January 2015.
USA crude stocks rose 6.5 million barrels last week, the fourth straight weekly build, according to the Energy Information Administration - this despite crude production slipping 300,000 barrels per day (bpd) to 10.9 million bpd last week due to Hurricane Michael. Iran supplied 18.4 million tonnes of crude oil between April 2017 and January 2018 (first 10 months of fiscal 2017-18).
USA lawmakers blamed the Saudi leadership over the disappearance of prominent Saudi critic and journalist Jamal Khashoggi, indicating that sanctions could be possible.
"We need to see signs loss of Iranian barrels will be replaced by other producers", said Gene McGillian, vice president of market research for Tradition Energy in Stamford, Connecticut.
"Stocks are rising in the United States, and the reason is because pipes out of the U.S. for exports are maxed out while USA production is rising", said Bjarne Schieldrop, Oslo-based chief commodities analyst at SEB AB.
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Meanwhile, Saudi Arabia will quietly add extra oil to the market over the next couple of months to offset a drop in Iranian production but is anxious it might need to limit output next year to balance global supply and demand as the United States pumps more crude.
On Friday, front-month USA crude futures traded at the biggest discount to the second month in almost a year.
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.
There is no way to wield the oil weapon, which would not shake the foundations of the U.S. -Saudi alliance on which the kingdom's defense depends, leaving it vulnerable to regional rivals, including Iran.
"We are engaged with the United States on this matter and we have shared our position with the USA at different levels", Kumar said.
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. Brent ended the week down 0.8%.
"Despite the bullish talk, Saudi Arabia is very unlikely to pick the oil market as a means for retaliation", said Norbert Ruecker, head of macro and commodity research at Julius Baer Group Ltd.in Zurich.