Oil mixed as China tariff talk scotches early rally

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Iran is now OPEC's third-largest producer, but the United States wants to cut its production down to zero by November as part of sanctions imposed on the country.

Washington's withdrawal from the landmark Iran nuclear deal was criticized across the world. It arrived at the ship-to-ship transfer area off Dubai on August 7 and has been anchored there since. U.S. light crude oil prices fell by more than a $1 down to $69.22 a barrel.

China was the largest buyer of Iranian crude past year, accounting for nearly a third of Iran's crude and condensate exports.

Iran finally managed to get Dino I and Dune to China out of Kharg Island.

During the first half of this year, Iran shipped 660,000 bpd of oil to China.

India has cleared that it does not recognize the sanctions by the U.S. on Iran but it is negotiating with the United States to win a waiver in order to protect itself from the wider exposure to US financial system.

Meanwhile, Storm Isaac, a second hurricane hurtling across the mid-Atlantic, could pose an even bigger threat to oil supplies if it makes landfall on the Gulf of Mexico - a main hub for U.S. refinery and production.

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The pipe, which also sends crude oil to the north-east of the USA, could be subject to flooding or power outages if the hurricane hits pumping station. Tanker tracking compiled by Bloomberg indicates that OPEC's fourth-largest exporter is already having to store barrels amid dwindling demand.

The International Energy Agency said crude oil output among OPEC members surged by 420,000 barrels per day to average 32.63 millions a day in August, the Wall Street Journal reports. Exports fell 280,000 bpd reaching to 1.9 million bpd from a peak of 2.5 million bpd in May.

US production jumped in recent years because of techniques including hydraulic fracturing, or "fracking", which is the use of chemicals, sand, water and high pressure to crack rock formations deep below ground, releasing more oil and natural gas.

Iran will face U.S. sanctions on its oil sector in early November.

The White House has announced that Saudi Arabia's King Salman had promised Trump to raise oil production and that the kingdom had two million barrels per day of spare capacity to boost output to offset a decline in supply from Iran.

Asian consumers of oil have begun to reduce purchases of Iranian oil and South Korea has reduced its imports Iranian crude to zero, on direct orders of the White House.

If Iran can get its oil to a friendly port, it could be blended with oil from elsewhere and resold, said Thijs Van de Graaf, assistant professor for global politics at the University of Ghent.

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