Oil prices fall as US grants Iran sanction waivers to major importers

Oil markets have been preparing for the US sanctions on Iran for months. Above, gas flares from an oil production platform at the Soroush oil fields in the Arabian Gulf, south of Tehran. (Reuters)
Updated 05 November 2018

Oil prices fall as US grants Iran sanction waivers to major importers

  • The US said on Friday it will temporarily allow eight importers to keep buying Iranian oil.
  • Oil markets have been preparing for the US sanctions on Iran for months

SINGAPORE: Oil prices fell on Monday as the start to US sanctions against Iran’s fuel exports was softened by waivers that will allow major buyers to still import Iranian crude, at least temporarily.
Front-month Brent crude futures were at $72.40 per barrel at 0332 GMT on Monday, down 43 cents, or 0.6 percent from their last close.
US West Texas Intermediate (WTI) crude futures were down 46 cents, or 0.7 percent, at $62.68 a barrel.
Brent has lost more than 16 percent in value since early October, while WTI has declined by more than 18 percent since then, in part as hedge funds have cut their bullish wagers on crude to a one-year low by the end of October, data showed on Friday.
Prices came under pressure as it became clear that Washington was allowing several countries to continue importing crude from Iran despite the sanctions, which officially started on Monday.
The US said on Friday it will temporarily allow eight importers to keep buying Iranian oil.
Washington has so far not named the eight, referred to as “jurisdictions,” a term that might include Taiwan which the US does not regard as a country.
China, India, South Korea, Turkey, Italy, the United Arab Emirates and Japan have been the top importers of Iran’s oil, while Taiwan occasionally buys Iranian crude.
Japan said on Monday it was in close communication with the US. While Chief Cabinet Secretary Yoshihide Suga declined to detail any potential sanction waivers, he said his government had asked Washington that sanctions should not have an adverse impact on Japanese companies.
Oil markets have been preparing for the sanctions for months.
“Iranian exports and production had been declining steadily ... Iranian exports show a decline of more than 1 million barrels per day (bpd) as of October from May,” said Edward Bell of Emirates NBD bank.
On the demand side, Bell warned that consumption may be slowing due to an economic slowdown, as seen in a sharp drop in refining profits.
“Sagging refining margins at a time of weak crude prices sends a very telling message to us that demand is underperforming,” he said.
A slowdown in demand would come just as output is rising.
Joint output from the world’s top producers — Russia, the US and Saudi Arabia — in October rose above 33 million bpd for the first time, up 10 million bpd since 2010.
These three countries alone meet more than a third of consumption.
In the Middle East, Abu Dhabi National Oil Company plans to increase its oil production capacity to 4 million bpd by the end of 2020 and 5 million bpd by 2030, ADNOC said on Sunday, compared with current output of just over 3 million bpd.


Oil prices fall but losses limited by Brexit deal hopes

Updated 18 October 2019

Oil prices fall but losses limited by Brexit deal hopes

  • US retail sales in September fell for the first time in seven months adding to economy fears

LONDON: Oil prices fell on Thursday as industry data showed a larger than expected increase in US inventories but losses were limited after Britain and the EU announced they had reached a deal on Brexit.

Global benchmark Brent crude was down 37 cents at $59.05 in afternoon London trade while US WTI crude was also down 37 cents, at $52.99.

US crude inventories soared by 10.5 million barrels to 432.5 million barrels in the week to Oct. 11, the American Petroleum Institute’s weekly report showed, ahead of official government stocks data.

Analysts had estimated US crude inventories rose by 2.8 million barrels last week.

“US sanctions imposed on Chinese shipping company COSCO are seriously denting demand for imported crude ... This has a profound impact on US crude oil inventories as reflected in last night’s API report,” said Tamas Varga, an analyst at PVM Oil Associates.

“US refinery maintenance is not helping to reverse the current trend and further builds in US crude oil inventories can be expected in the next few weeks.”

The US imposed sanctions on COSCO Shipping Tanker (Dalian) and subsidiary COSCO Shipping Tanker (Dalian) Seaman & Ship Management for allegedly carrying Iranian oil.

Adding to concerns about the global economy — and therefore oil demand — data from the US showed retail sales in September fell for the first time in seven months. Earlier data showed a moderation in job growth and services sector activity.

Nevertheless, Brexit developments helped limit oil’s decline. Prime Minister Boris Johnson said Britain and the EU had agreed a “great” new deal and urged lawmakers to approve it when they meet for a special session at the weekend.

Analysts have said any agreement that avoids a no-deal Brexit should boost economic growth and oil demand.

However, the Northern Irish party whose support Johnson needs to help ratify any agreement, has said that it refused to support the pact.

Hopes of a potential US-China trade deal also supported oil. The commerce ministry in Beijing said China hoped to reach a phased agreement with Washington as early as possible.

But the German government has lowered its 2020 forecast for economic growth to 1 percent from 1.5 percent, the economy ministry said. It said Germany, Europe’s largest economy, was not facing a crisis.