Brent crude prices dip on rising supply, global market woes

The price of oil was being weighed down by signs of rising supply from top producers. (Reuters)
Updated 30 October 2018
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Brent crude prices dip on rising supply, global market woes

SINGAPORE: Brent oil prices fell on Tuesday, weighed down by ongoing weakness in global stock markets and by signs of rising global supply despite looming sanctions on Iran’s crude exports.
Front-month Brent crude oil futures were at $77 a barrel at 0246 GMT, down 34 cents, or 0.4 percent, from their last close.
US West Texas Intermediate (WTI) crude futures were at $67.08 a barrel, little changed from their last settlement.
Oil has been caught up by broad financial market slumps this month, with stocks falling again on Monday after reports the US is planning an additional $257 billion worth of tariffs on Chinese goods if upcoming talks between Presidents Donald Trump and Xi Jinping fail to end a trade war between the world’s two largest economies.
Oil was also being weighed down by signs of rising supply from top producers.
“A Saudi pledge to produce as much oil as possible, and the stock market rout, have sharply reduced concerns about the Nov. 4 implementation of US sanctions against Iran,” said Ole Hansen, head of commodity strategy at Saxo Bank.
Russia has also indicated that it will provide enough oil to meet demand once US sanctions hit Iran from next week.
In a sign that oil supply remains ample despite the looming US sanctions against Iran’s petroleum exports, crude output from the world’s top 3 producers, Russia, the US and Saudi Arabia, reached 33 million barrels per day (bpd) for the first time in September, Refinitiv Eikon data showed.
That’s an increase of 10 million bpd since the start of the decade and means that these three producers alone now meet a third of global crude demand.
Hedge fund managers continued to liquidate former bullish positions in oil last week, with signs of short-selling appearing for the first time in over a year.
Despite that, Hansen said “given the yet unknown impact on Iran’s ability to produce and export (amid sanctions) ... we could see some speculative buying emerge ahead of Nov. 4.”
Iran’s seaborne crude exports, by contrast, have fallen from a 2018-peak of just over 2.5 million bpd in May to around 1.5 million bpd in September and October, Eikon data showed.


Oil prices near 2019 highs after US ends all Iran sanction exemptions

Updated 32 min 37 sec ago
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Oil prices near 2019 highs after US ends all Iran sanction exemptions

  • Iran’s main oil buyers initially received sanction exemptions
  • US reiterates its goal to cut Iran oil exports to zero

SINGAPORE: Oil prices were near 2019 highs on Tuesday after Washington announced all Iran sanction waivers would end by May, pressuring importers to stop buying from Tehran.
Brent crude futures were at $74.40 per barrel at 0239 GMT, up 0.5 percent from their last close and not far off a 2019 peak of $74.52 reached on Monday.
US West Texas Intermediate (WTI) crude futures hit their highest level since October 2018 at $65.95 per barrel before edging back to $65.89 by 0239 GMT, which was still up 0.5 percent from their last settlement.
The United States on Monday demanded that buyers of Iranian oil stop purchases by May 1 or face sanctions, ending six months of waivers which allowed Iran’s eight biggest buyers, most of them in Asia, to continue importing limited volumes.
Before the reimposition of sanctions last year, Iran was the fourth-largest producer among the Organization of the Petroleum Exporting Countries (OPEC) at almost 3 million barrels per day (bpd), but April exports have shrunk well below 1 million bpd, according to ship tracking and analyst data in Refinitiv.
Barclay’s bank said in a note following the announcement that the decision took many market participants by surprise and that the move would “lead to a significant tightening of oil markets.”
The British bank added that Washington’s target to cut Iran oil exports to zero posed a “material upside risk to our current $70 per barrel average price forecast for Brent this year, compared with the year-to-date average of $65 per barrel.”
ANZ bank said in a note on Tuesday that “the decision is likely to worsen the ongoing supply woes being felt with Venezuelan sanctions, the OPEC supply cut, and intensifying conflict in Libya.”
The move to tighten Iran sanctions comes amid other sanctions Washington has placed on Venezuela’s oil exports and also as producer club OPEC has led supply cuts since the start of the year aimed at tightening global oil markets and propping up crude prices.
Ellen Wald, non-resident senior fellow at the Global Energy Center of the Atlantic Council, said the United States “seem to expect” Saudi Arabia and the United Arab Emirates to replace the Iranian oil, but she added “that this is not necessarily the way Saudi Arabia sees it.”
Saudi Arabia is the world’s biggest exporter of crude oil and OPEC’s de-facto leader. The group is set to meet in June to discuss its output policy.
“Should OPEC decide to end their supply cut program going into the second half of the year, this could limit oil’s upside in the coming months,” said Lukman Otunuga, analyst at futures brokerage FXTM.
Meanwhile, the Atlantic Council said the US move would hurt Iranian citizens.
“We’re going to see their currency collapse more, more unemployment, more inflation,” said Barbara Slavin, director for the Future of Iran Initiative at the Atlantic Council, adding that the US sanctions were “not going to bring Iran back to the (nuclear) negotiating table.”