Oil prices spike more than 3% on reports that US will end waivers for Iran sanctions

KEY POINTS
  • Brent crude futures surged more than 3 percent to over $74 per barrel on Monday morning during Asia hours, while U.S. crude futures rose around 2.67 percent to $65.71 per barrel.
  • The oil spike followed reports that U.S. Secretary of State Mike Pompeo will announce that from May 2, the State Department will no longer grant sanctions waivers to any country that is currently importing Iranian crude or condensate.
GP: Iran Oil Tanker 190121
The oil tanker ‘Devon’ prepares to transfer crude oil from Kharg Island oil terminal to India in the Persian Gulf, Iran, on March 23, 2018.
Ali Mohammadi | Bloomberg | Getty Images

Oil prices spiked by more than 3 percent on Monday — past highs not seen since November 2018 — after reports that Washington is set to announce that all buyers of Iranian oil will have to end imports, or be subject to U.S.sanctions.

Brent crude futures surged more than 3 percent to over $74 per barrel on Monday morning during Asia hours, while U.S. crude futures rose around 2.67 percent to $65.71 per barrel.

That price spike followed a report by the Washington Post, citing two unnamed State Department officials, that U.S. Secretary of State Mike Pompeo will announce that “as of May 2, the State Department will no longer grant sanctions waivers to any country that is currently importing Iranian crude or condensate.” Condensate is an ultra-light form of crude oil.

Following that report, Reuters confirmed the news, citing a source familiar with the matter.

VIDEO03:22
Oil prices could hit $80 per barrel in first half of 2019: JBC Energy

Brent prices have risen by more than a third this year, while U.S. crude has soared more than 40 percent.

The U.S. reimposed sanctions in November on exports of Iranian oil after U.S. President Donald Trump unilaterally pulled out of a 2015 nuclear accord between Iran and six world powers. Washington, however, granted Iran’s eight main buyers of oil, mostly in Asia, waivers to the sanctions which allowed them limited purchases for an additional six months.

Impact on India

The eight buyers are China and India — Iran’s biggest customers — as well as JapanSouth KoreaItalyGreeceTurkey and Taiwan.

“The sanctions (are) obviously one of the major movers, I think, which is influencing prices,” said Daryl Liew, head of portfolio management at financial services company Reyl Singapore. He also pointed to stronger-than-expected economic growth data from China last week, which could be driving demand expectations.

Of the buyers of Iranian oil, he said India could suffer the most from Washington’s move.

“I think India is probably one of the key potential countries that might suffer from a higher oil price, in terms of their current account deficit, for example. And that’s going to be basically putting pressures on inflationary pressures as well,” Liew said, speaking on CNBC’s “Street Signs” on Monday.

“No doubt the Indian central bank has … turned to a more dovish stance in recent meetings. But if oil prices continue to hit higher, and inflationary pressures come back into the picture again for India especially, then the central bank probably has to reverse the dovish moves,” he concluded.

Tightening supplies, Libya conflict

That development on sanctions comes as global oil supply is already tightening, with OPEC leading supply cuts since the beginning of this year, to prop up crude prices.

In the U.S., energy firms last week reduced the number of oil rigs operating by two, to 825, General Electric’s Baker Hughes energy services firm said in its weekly report on Thursday.

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Oil prices likely to head higher as OPEC stands firm on production cuts, says RBC’s Helima Croft

Meanwhile, major OPEC oil producer Libya’s capital Tripoli was hit by a series of airstrikes and explosions over the weekend, in escalating violence that could threaten oil supply further.

The country has been torn by conflict since the fall of dictator Muammar Gaddafi in 2011. It was sent into fresh conflict in recent weeks after its eastern military leader ordered his forces to move in on the capital where the United Nations-recognized government sits.

Analysts and traders keep a close eye on Libya because its oil production has been one of the biggest wild cards in the oil market in recent years. Its output has fluctuated wildly as the nation’s southern oil fields have frequently gone offline amid fighting.

One analyst told CNBC on Monday that the Libya situation will put more pressure on oil prices, particularly if the conflict escalates.

“Libya is producing 1.1 million barrels per day. If things go wrong, immediately somewhere around 300,000 to 400,000 barrels per day of oil may be affected,” said Kang Wu, head of analytics for Asia at S&P Global Platts.

“A lot depends on how Saudi Arabia will react to the situation — they have surplus capacity — but supply concerns will keep pressure on oil prices in the short term, ” Wu added.

— Reuters and CNBC’s Tom DiChristopher contributed to this report.

Venezuela skirts US sanctions by funneling oil sales via Russia

CNBC

Reuters

KEY POINTS
  • President Nicolas Maduro is funneling cash flow from Venezuelan oil sales through Russian state energy giant Rosneft as he seeks to evade U.S. sanctions designed to oust him from power.
  • The sales are the latest sign of the growing dependence of Venezuela’s cash-strapped government on Russia.
  • Under the scheme uncovered by Reuters, Venezuelan state oil company PDVSA has started passing invoices from its oil sales to Rosneft.
RT: Venezuela's President Nicolas Maduro 180302
Venezuela’s President Nicolas Maduro talks to the media after a meeting for signing an agreement on guarantees for the vote at the National Electoral Council (CNE) headquarters in Caracas, Venezuela March 2, 2018.
Marco Bello | Reuters

President Nicolas Maduro is funneling cash flow from Venezuelan oil sales through Russian state energy giant Rosneft as he seeks to evade U.S. sanctions designed to oust him from power, according to sources and documents reviewed by Reuters.

The sales are the latest sign of the growing dependence of Venezuela’s cash-strapped government on Russia as the United States tightens a financial noose around Maduro, who it describes as a dictator.

With its economy reeling from years of recession and a sharp decline in oil production, Venezuela was already struggling to finance imports and government spending before Washington imposed tough restrictions on state oil company PDVSA in January.

Oil accounts for more than 90 percent of exports from the OPEC nation and the lion’s share of government revenues. Maduro has accused U.S. President Donald Trump of waging economic war against Venezuela.

Since January, Maduro’s administration has been in talks with allies in Moscow about ways to circumvent a ban on clients paying PDVSA in dollars, the sources said. Russia has publicly said the U.S. sanctions are illegal and it would work with Venezuela to weather them.

Under the scheme uncovered by Reuters, Venezuelan state oil company PDVSA has started passing invoices from its oil sales to Rosneft.

The Russian energy giant pays PDVSA immediately at a discount to the sale price avoiding the usual 30-to-90 day timeframe for completing oil transactions and collects the full amount later from the buyer, according to the documents and sources.

“PDVSA is delivering its accounts receivable to Rosneft,” said a source at the Venezuelan state firm with knowledge of the deals, who spoke on condition of anonymity for fear of retaliation.

Major energy companies such as India’s Reliance Industries – PDVSA’s largest cash-paying client – have been asked to participate in the scheme by paying Rosneft for Venezuelan oil, the documents show.

Rosneft, which has heavily invested in Venezuela under President Vladimir Putin, did not immediately respond to a request for comment.

Venezuela’s oil ministry, its information ministry, which handles media for the government, and PDVSA did not respond to questions.

Asked about the transactions, a spokesperson for Reliance said it had made payments to Russia and Chinese companies for Venezuelan oil. The spokesperson said the payments were deducted from money owed by Venezuela to those countries, but did not provide further details.

“We are in active dialogue with the U.S. Department of State on our dealings on Venezuelan oil to remain compliant with U.S. sanctions,” the spokesperson said.

Oil prices slip amid ample US output, Brent drifts away from five-month high

CNBC

Reuters

KEY POINTS
  • Brent crude futures were at $71.42 a barrel at 0235 GMT, down 20 cents, or 0.3 percent, from their last close. Brent fell 0.1 percent on Wednesday, after earlier touching its highest since Nov. 8 at $72.27 a barrel.
  • U.S. West Texas Intermediate (WTI) crude futures were at $63.69 per barrel, down 7 cents, or 0.1 percent, from their previous settlement. WTI closed the last session down 0.5 percent.
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An oil pumpjack operates near Williston, North Dakota.
Andrew Cullen | Reuters

Oil prices dropped on Thursday as the impact of plentiful U.S. production offset a surprise decline in U.S. inventories, leaving international benchmark Brent retreating from a five-month high touched in the previous session.

Brent crude futures were at $71.42 a barrel at 0235 GMT, down 20 cents, or 0.3 percent, from their last close. Brent fell 0.1 percent on Wednesday, after earlier touching its highest since Nov. 8 at $72.27 a barrel.

U.S. West Texas Intermediate (WTI) crude futures were at $63.69 per barrel, down 7 cents, or 0.1 percent, from their previous settlement. WTI closed the last session down 0.5 percent.

U.S. crude inventories fell by 1.4 million barrels in the week to April 12, compared with analyst expectations for an increase of 1.7 million barrels, Department of Energy (DoE) showed on Wednesday.

“A persistent rise in U.S. oil output, together with lingering demand-side concerns emerging from the U.S.-China trade dispute, is limiting price gains, ” Abhishek Kumar, Head of Analytics at Interfax Energy in London.

While official data on Wednesday showed China’s economy grew by 6.4 percent in the first quarter, defying expectations for a further slowdown, talks on a U.S.-China trade deal have yet to bear fruit.

While the U.S.-China trade war has rumbled on, prices have been supported this year by an agreement reached by the Organization of the Petroleum Exporting Countries (OPEC) and allies, including Russia, to limit their oil output by 1.2 million barrels per day.

Global supply has also been tightened further by U.S. sanctions on OPEC members Venezuela and Iran.

Iran’s crude exports have dropped in April to their lowest daily level this year, tanker data showed and industry sources said, suggesting a drawdown in buyer interest ahead of expected further pressure from Washington.

Surging U.S. production has filled some of the gap in supplies, although not all of the lost production can be immediately replaced by U.S. shale oil due to refinery configurations.

“The unexpected drawdown in U.S. commercial crude oil stocks was balanced by lower-than-expected withdrawals in the country’s gasoline and distillate inventories,” Kumar said.

Gasoline stocks fell by 1.2 million barrels, less than analysts’ expectations in a Reuters poll for a 2.1 million-barrel drop.

Distillate stockpiles, which include diesel and heating oil, fell 362,000 barrels, also not as much as forecasts for a 846,000-barrel drawdown, the EIA data showed.

Net U.S. crude imports fell last week by 659,000 barrels per day.

Oil slips to $71, hit by talk of higher OPEC+ production

CNBC

Reuters

KEY POINTS
  • Analysts expect U.S. crude stockpiles to have risen by 1.9 million barrels last week, the fourth straight increase.
  • Oil fell Monday after comments from Russia raised concern the OPEC-led supply-cutting pact may not be renewed.
  • OPEC and its allies are due to meet in June to decide whether to continue the arrangement.
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Andrew Burton | Getty Images

Brent oil slipped to around $71 a barrel on Tuesday, pressured by expectations of higher U.S. inventories and concern about Russia’s willingness to stick with OPEC-led supply cuts.

Analysts on average expect U.S. crude stockpiles to have risen by 1.9 million barrels last week, the fourth straight increase. The first of this week’s stockpile reports is due at 2030 GMT from the American Petroleum Institute.

“We have already seen these inventories going higher in the last week’s print,” said Naeem Aslam, chief market analyst at TF Global Markets in London.

“The rising inventory data has raised many questions for investors – no one wants to see the oil glut again.”

Brent crude, the global benchmark, was down 12 cents at $71.06 a barrel at 0801 GMT. U.S. West Texas Intermediate (WTI) crude gained 6 cents to $63.46.

While OPEC-led supply cuts have boosted Brent by more than 30 percent this year, gains have been limited by worries that slowing economic growth could weaken demand for fuel.

Oil also fell on Monday after comments from Russia raised concern the OPEC-led supply-cutting pact may not be renewed. Russia and the producer group may decide to boost output to fight for market share with the United States, TASS news agency ited Finance Minister Anton Siluanov as saying.

The Organization of the Petroleum Exporting Countries and other producers including Russia, an alliance known as OPEC+, have been cutting output since Jan. 1. They decide in June whether to continue the arrangement.

“There is a growing concern that Russia will not agree on extending production cuts and we could see them officially abandon it in the coming months,” said Edward Moya, senior market analyst at OANDA.

Oil edges lower as supply concerns check losses

CNBC

Reuters

KEY POINTS
  • Oil prices edged lower on Monday after international benchmark Brent hit a fresh five-month high in the previous session, but concerns over global supplies provided a floor to losses.
  • Brent crude oil futures were at $71.40 a barrel at 0015 GMT, down 15 cents, or 0.2 percent, from their last close.
  • U.S. West Texas Intermediate (WTI) crude futures were at $63.60 per barrel, down 29 cents, or 0.5 percent, from their last settlement. WTI rose 0.5 percent on Friday.
RT: Oil refinery Libya 131218
Ismail Zitouny | Reuters

Oil prices edged lower on Monday after international benchmark Brent hit a fresh five-month high in the previous session, but concerns over global supplies provided a floor to losses.

Brent crude oil futures were at $71.40 a barrel at 0015 GMT, down 15 cents, or 0.2 percent, from their last close. Brent closed up 1 percent on Friday when prices hit a high of $71.87 a barrel, the highest since Nov. 12.

U.S. West Texas Intermediate (WTI) crude futures were at $63.60 per barrel, down 29 cents, or 0.5 percent, from their last settlement. WTI rose 0.5 percent on Friday.

The head of Libya’s National Oil Corp warned on Friday that renewed fighting could wipe out crude production in the country.

“Supply side issues remained a concern for the market. Libyan rebel leader Khalifa Haftar moved forces closer to Tripoli,” ANZ Bank said in a research note.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies meet in June to decide whether to continue withholding supply. OPEC, Russia and other producers, an alliance known as OPEC+, are reducing output by 1.2 million bpd from Jan. 1 for six months.

OPEC’s de facto leader, Saudi Arabia, is considered keen to keep cutting, but sources within the group said it could raise output from July if disruptions continue elsewhere.

Russia’s Finance Minister Anton Siluanov was quoted by the TASS news agency as saying on Saturday that Russia and OPEC may decide to boost production to fight for market share with the United States but this would push oil prices as low as $40 per barrel.