Oil drops as US considers granting some waivers on Iran crude sanctions

The US oil drilling rig count fell for a third consecutive week, as rising costs and pipeline bottlenecks have hindered new drilling since June. (Reuters)
Updated 08 October 2018
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Oil drops as US considers granting some waivers on Iran crude sanctions

  • US sanctions will target Iran’s crude oil exports from November 4
  • Traders said ongoing concerns that the US-Chinese trade war could slow down economic growth

SINGAPORE: Brent crude oil prices fell more than 1 percent on Monday after Washington said it may grant waivers to sanctions against Iran’s oil exports next month, and as Saudi Arabia was said to be replacing any potential shortfall from Iran.
International benchmark Brent crude oil futures were at $83.26 per barrel at 0352 GMT, down 90 cents, or 1.1 percent, from their last close.
US West Texas Intermediate (WTI) crude futures were down 54 cents, or 0.7 percent, at $73.80 a barrel.
US sanctions will target Iran’s crude oil exports from November 4, and Washington has been putting pressure on governments and companies worldwide to cut their imports to zero.
However, a US government official said on Friday that the country could consider exemptions for nations that have already shown efforts to reduce their imports of Iranian oil.
In a sign that Iran oil exports won’t fall to nothing from November, India will buy 9 million barrels of Iranian crude next month, Reuters reported on Friday.
Hedge funds cut their bullish wagers on US crude in the latest week to the lowest level in nearly a year, data showed on Friday.
Traders said ongoing concerns that the US-Chinese trade war could slow down economic growth also weighed on crude on Monday.
China’s stocks fell sharply on Monday despite an announcement from Beijing over the weekend that it would slash the level of cash that banks must hold as reserves, a sign of underlying investor anxiety over the heated Sino-US trade war.
Further weighing on oil prices was “chatter that Saudi Arabia has replaced all of Iran’s lost oil,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.
But Innes warned that limited spare production to deal with further supply disruptions meant “the capacity is quickly declining due to Asia’s insatiable demand.”
The US oil drilling rig count fell for a third consecutive week, as rising costs and pipeline bottlenecks have hindered new drilling since June.
Drillers cut two oil rigs in the week to Oct. 5, bringing the total count down to 861, energy services firm Baker Hughes said in its weekly report on Friday.
That is the longest streak of weekly cuts since October last year.
With Iran sanctions still on the table, potential spare capacity constraints and also a slowdown in US drilling, US bank JP Morgan said in its latest cross-asset outlook for clients that it recommended to “stay long Jan ‘19 WTI on supply risks to crude.”


Libya’s National Oil against paying ‘ransom’ to reopen El Sharara field

Updated 14 December 2018
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Libya’s National Oil against paying ‘ransom’ to reopen El Sharara field

  • Ransom payment would set dangerous precedent
  • NOC declared force majeure on exports on Monday

BENGHAZI: Libya’s state-owned National Oil Corp. (NOC) said it was against paying a ransom to an armed group that has halted crude production at the country’s largest oilfield.
“Any attempt to pay a ransom to the armed militia which shut down El Sharara (oilfield) would set a dangerous precedent that would threaten the recovery of the Libyan economy,” NOC Chairman Mustafa Sanalla said in a statement on the company’s website.
NOC on Monday declared force majeure on exports from the 315,000-barrels-per-day oilfield after it was seized at the weekend by a local militia group.
The nearby El-Feel oilfield, which uses the same power supply as El Sharara, was still producing normally, a spokesman for NOC said, without giving an output figure. The field usually pumps around 70,000 bpd.
Since 2013 Libya has faced a wave of blockages of oilfields and export terminals by armed groups and civilians trying to press the country’s weak state into concessions.
Officials have tended to end such action by paying off protesters who demand to be added to the public payroll.
At El Sharara, in southern Libya, a mix of state-paid guards, civilians and tribesmen have occupied the field, camping there since Saturday, protesters and oil workers said. The protesters work in shifts, with some going home at night.
NOC has evacuated some staff by plane, engineers at the oilfield said. A number of sub-stations away from the main field have been vacated and equipment removed.
The occupiers are divided, with members of the Petroleum Facilities Guard (PFG) indicating they would end the blockade in return for a quick cash payment, oil workers say. The PFG has demanded more men be added to the public payroll.
The tribesmen have asked for long-term development funds, which might take time.
Libya is run by two competing, weak governments. Armed groups, tribesmen and normal Libyans tend to vent their anger about high inflation and a lack of infrastructure on the NOC, which they see as a cash cow booking billions of dollars in oil and gas revenues annually.