Volatility heightened last week, which closed with prices at their lowest in almost a month, after hitting a six-month high a week ago.
Prices slumped after a buildup in US crude inventories by 10 million barrels, amid record high US oil production to 12.3 million bpd.
That took the edge off earlier bullish market sentiment after expectations that the upcoming Iranian oil supply shortage would be filled by other OPEC producers.
Brent crude fell to $70.86 per barrel, while WTI fell to $61.94.
Asian refiners, the largest buyers of Iranian crude, have already begun asking other producers for higher volumes for June and July loadings.
This comes in light of the expected fall in Iranian crude as the waivers of previous US sanctions expire, as reported by S&P Global Platts.
Asian refiners are seeking car- goes for June and July to substi- tute Iranian barrels — though it is unclear if Chinese refiners are among them or if the world’s larg- est oil importer will continue with commercial swap arrangements as in 2012 — not a preferred option for Tehran.
The US 2019 gasoline price aver- age is within the range of $2.70 to $2.80 per gallon, which is just 50 cents higher than at the start of the Trump presidency.
The oil market suggests there is an incompatibility between US energy policy goals for lower prices and OPEC goals for a steady supply and demand balance.
The unexpected introduction of US sanctions waivers pushed the market into a surplus last year which led to the softening of the oil price.
That was only resolved by the 1.2 million bpd production cuts agreed by the so called OPEC+ group that took effect in January, which helped tighten the market and bring it back into balance.
Still, producers remain cautious. The market does not expect OPEC to react to the expiry of waivers by increasing supplies in the same way it did last year.
OPEC producers have until June 25, when they meet next, to read the situation and assess the likely impact of ending US sanctions waivers on Iranian crude exports.
*Faisal Mrza is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter: @faisalmrza