The U.S. trade dispute with China, in a roundabout way, could determine how successful the U.S. will be in sanctioning Iran's oil this time around — and that uncertainty is also playing out at OPEC.
In the tit-for-tat tariff war with the U.S., China said last week it would put tariffs on U.S. oil imports. The U.S. is not a major oil exporter, but it has been growing exports and is exporting about 2 million barrels a day of crude. About 300,000 barrels of that heads to China each day, and China could stop those purchases depending on how the trade dispute develops with the U.S., according to Scott Sheffield, executive chairman of Pioneer National Resources.
At the same time, China is a major player, and as the biggest importer of crude it could tilt the world scales in determining how much Iranian crude will be taken off the world market. Analysts expect buyers of Iranian crude in Europe and places such as Japan and South Korea to slow down or stop buying Iranian supply before the end of the year.
The Organization of the Petroleum Exporting Countries, meanwhile, sees a need to return oil to the market because of Iran and other outages, including the steady decline in Venezuelan output, but its members are squabbling among themselves over how much oil to return to the market, and that decision is critical to OPEC's deal of cooperation with Russia and other producers who meet on Saturday.
OPEC's discussions of how much oil to return to the market are also key to its agreement with Russia and other producers, but there is disagreement. Saudi Arabia is believed to want to return 500,00 to 600,000 barrels to the market, but Iran objects to increasing output. Russia's energy minister has said Russia would like to return 1.5 million barrels a day just for the third quarter and take measure of the market after that.