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.”


Oil prices fall as US crude output hits record

Updated 33 sec ago
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Oil prices fall as US crude output hits record

  • US crude oil production reached 12 million barrels per day for the first time last week
  • As output surges, US oil stocks are also rising

SINGAPORE: Oil prices fell on Friday after the United States reported its crude output hit a record 12 million barrels per day (bpd), undermining efforts by Middle East-dominated producer club OPEC to withhold supply and tighten global markets.
International Brent crude futures were at $66.87 per barrel at 0326 GMT, down 20 cents, or 0.3 percent, from their last close.
US West Texas Intermediate (WTI) crude oil futures were at $56.84 per barrel, down 12 cents, or 0.2 percent, from their last settlement.
US crude oil production reached 12 million bpd for the first time last week, the Energy Information Administration (EIA) said on Thursday in a weekly report.
That means US crude output has soared by almost 2.5 million bpd since the start of 2018, and by a whopping 5 million bpd since 2013. America is the only country to ever reach 12 million bpd of production.
As output surges, US oil stocks are also rising.
US commercial crude oil inventories rose by 3.7 million barrels to 454.5 million barrels in the week ended Feb. 15, the EIA said.
Analysts say US output will rise further and that oil firms will export more oil to sell off surplus stocks.
“We see total US crude production hitting 13 million bpd by year-end, with 2019 averaging 12.5 million bpd,” US bank Citi said following the release of the EIA report.
Of that, the bank said, “we could be seeing some weeks with 4.6 million bpd of gross crude exports by end-year, adding to this week’s new record” of 3.6 million bpd.
Friday’s dips at least temporarily halted a rally that pushed crude prices this week to their highest for 2019 so far amid the supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC).
OPEC and some non-affiliated producers such as Russia agreed late last year to cut output by 1.2 million bpd to prevent a large supply overhang from growing.
Another recent price driver has been US sanctions against oil exporters Iran and Venezuela.