Oil drops on Iran sanction exemptions, economic concerns

CNBC

  • U.S. sanctions on Iran’s fuel exports were reintroduced on Monday.
  • Washington has granted 180-day exemptions to eight importers, meaning Iran will be allowed to still export some oil for now.

Oil prices slipped on Tuesday, weighed down by exemptions from Washington that will allow Iran’s biggest oil customers to keep buying from Tehran, as well as concerns that an economic slowdown may curb fuel demand growth.

U.S. West Texas Intermediate (WTI) crude futures were at $62.95 a barrel at 0355 GMT, down 15 cents, or 0.2 percent, from their last settlement.

International Brent crude oil futures were down 28 cents, or 0.4 percent, at $72.89 a barrel.

Analysts said expectations of an economic slowdown in coming months were weighing on the fuel demand outlook, while concerns eased on the supply-side after Washington granted eight importers of Iranian oil sanctions waivers that will allow them to continue purchases.

Washington gave 180-day exemptions to eight importers – China, India, South Korea, Japan, Italy, Greece, Taiwan and Turkey. These are Iran’s biggest buyers, meaning Iran will be allowed to still export some oil for now.

Jameel Ahmad, head of market research at futures brokerage FXTM said the “sanctions on Iran have been … priced into the oil markets”, and that he would “instead focus more heavily on the global demand outlook because of the ongoing external uncertainties weighing down on economic prospects.”

Ahmad added that he saw a slowdown in economic and fuel demand growth as “more of a risk for oil over the coming months.”

Currency weakness is putting pressure on key growth economies in Asia, including India and Indonesia.

At the same time, the trade dispute between the United States and China is threatening growth in the world’s two biggest economies.

On the supply-side, oil is in ample availability despite the sanctions against Iran as output from the world’s top-three producers, Russia the United States and Saudi Arabia, is rising.

The three countries combined produced more than 33 million barrels per day (bpd) for the first time in October, meaning they alone meet more than a third of the world’s almost 100 million bpd of crude oil consumption.

Amid ample supply, top crude exporter Saudi Arabia has cut its December price for its Arab Light grade for Asian customers by 10 cents per barrel versus November to a premium of $1.60 a barrel to the Oman/Dubai average, state oil company Saudi Aramco said on Monday.

The price pressure on oil has scared off financial traders.

Hedge fund managers were net sellers of petroleum-linked futures and options for a fifth week running last week as concerns about sanctions on Iran evaporated and investors refocused on economic worries.

Portfolio managers have been net sellers of 371 million barrels since the end of September, taking their net long position to the lowest level for 15 months, according to records published by regulators and exchanges.

Oil prices fall one percent amid global stock market slump

CNBC

  • Oil markets remain cautious ahead of U.S. sanctions on Iran’s crude exports which go into effect from Nov. 4.

Oil prices fell by around one percent on Thursday, coming under pressure from sharp selloffs in global stock markets, with U.S. stocks posting the biggest daily decline since 2011 to wipe out the year’s gains.

Front-month Brent crude oil futures were at $75.42 a barrel at 0043 GMT, 75 cents, or 1 percent, below their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $66.23 a barrel, 59 cents, or 0.9 percent, below their last settlement.

“Oil prices fell under extreme selling pressure … as the steep selloff across stock markets fuelled fears over a possible drop in oil demand growth,” said Lukman Otunuga, analyst at futures brokerage FXTM.

Markets have been hit hard this month by a range of worries, including the Sino-U.S. trade war, a rout in emerging market currencies, rising borrowing costs and bond yields, as well as economic concerns in Italy.

In oil, WTI has fallen nearly 10 percent so far this month, while Brent is down nearly 9 percent.

Still, oil markets remain nervous ahead of U.S. sanctions against Iran’s crude exports, which kick in from Nov. 4.

Bowing to pressure from Washington, China’s oil-majors Sinopec and China National Petroleum Corp (CNPC) have not ordered any oil from Iran for November because of concerns that violating sanctions could impact their global operations.

China is Iran’s biggest oil customer. Halting oil Iranian imports means its many refiners will have to seek alternative supplies elsewhere.

Some relief could come from the United States, where crude production and storage levels are high.

U.S. commercial crude oil stockpiles rose for a fifth consecutive week last week, increasing by 6.3 million barrels to 422.79 million barrels, the Energy Information Administration said on Wednesday.

Output remained unchanged at 10.9 million barrels per day (bpd), slightly below a record 11.2 million bpd reached at the start of October.

Oil rises on looming Iran sanctions, but US-China trade war caps gains

CNBC

  • U.S. sanctions on Iran’s oil sector are set to go into effect on Nov. 4.
  • An internal document reviewed by Reuters suggested that the Organization of Petroleum Exporting Countries was facing difficulty in adding barrels to the market.

Oil prices rose on Monday as markets were expected to tighten once U.S. sanctions against Iran’s crude exports are implemented next month.

Front-month Brent crude oil futures were at $79.96 a barrel at 0414 GMT, 18 cents above their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $69.32 a barrel, 20 cents above their last settlement.

The U.S. sanctions on the oil sector in Iran, the third-largest producer in the Organization of the Petroleum Exporting Countries (OPEC), are set to start on Nov. 4. The United States under President Donald Trump is trying to reduce Iranian oil export to zero to force the country to renegotiate an agreement on its nuclear program.

U.S. Treasury Secretary Steven Mnuchin told Reuters on Sunday that it would be harder for countries to get sanction waivers than it was during the previous Obama administration, when several countries, especially in Asia, received them.

OPEC agreed in June to boost supply to make up for the expected disruption to Iranian exports.

However, an internal document reviewed by Reuters suggested OPEC is struggling to add barrels as an increase in Saudi supply was offset by declines elsewhere.

Fatih Birol, executive director of the International Energy Agency (IEA), said on Monday that other producers may struggle to fully make up for the expected Iran disruption, and that oil prices could rise further.

Traders said oil consumers were stockpiling in anticipation of more disruptions.

“In China, higher seasonal demand and suspected stockpiling are occurring, while similarly the U.S. and the OECD continue building stockpiles ahead of potential supply disruptions this winter,” said Stephen Innes, head of trading for Asia/Pacific at futures brokerage Oanda in Singapore.

Despite this, Innes said overall global oil supply was currently enough to meet demand.

U.S. drillers added four oil rigs in the week to Oct. 19, bringing the total count to 873, Baker Hughes energy services firm said on Friday, raising the rig count to the highest level since March 2015.

The U.S. rig count is an early indicator of future output. With activity rising again after months of stagnation, U.S. crude production is also expected to continue to rise.

Reflecting the changes to U.S. oil flows from the rising output and the increase in exports, the Intercontinental Exchange <ICE.N> said its new Permian West Texas Intermediate crude futures contract deliverable in Houston, Texas, will begin trading on Monday.

In addition to the potential for rising oil supply, the ongoing Sino-American trade dispute is expected to start dragging on demand.

“The full impact of the U.S.-China trade war will hit markets in 2019 and could act as a considerable drag on oil demand next year, raising the possibility of the market returning to surplus,” said Emirates NBD bank in a note.

Shipping brokerage Eastport said “Chinese manufacturing is beginning to slow” and that “Trump’s proposal of slapping…tariffs on additional…Chinese goods from 1 January would be a further drag on trade.”

Oil prices rise on signs that Iranian crude exports fall further

CNBC

  • Iran’s crude oil exports declined further in the first week of October, according to tanker data and an industry source.
  • The decline comes ahead of the re-imposition of sanctions by the U.S. on Iran in the coming weeks.

Oil prices rose on Tuesday as more evidence emerged that crude exports from Iran, OPEC’s third-largest producer, are declining in the run-up to the re-imposition of U.S. sanctions and as a hurricane moved across the Gulf of Mexico.

Brent crude was up 26 cents, 0.3 percent, at $84.17 a barrel by 0244 GMT. On Monday, Brent fell to a low of $82.66, but mostly recovered as investors bet China’s economic stimulus would boost crude demand. Brent rose to a four-year high of $86.74 last week.

U.S. West Texas Intermediate (WTI) crude futures were down by 24 cents, or 0.3 percent, at $74.53 a barrel. WTI fell to as low as $73.07 in the previous session but closed just 5 cents lower.

Iran’s crude exports fell further in the first week of October, according to tanker data and an industry source, as buyers are seeking alternatives ahead of the start of the U.S. sanctions on Nov. 4 and creating a challenge to other OPEC oil producers as they seek to cover the shortfall.

The Islamic Republic exported 1.1 million barrels per day (bpd) of crude in that seven-day period, Refinitiv Eikon data showed. An industry source who also tracks exports said October shipments were so far below 1 million bpd.

That is down from at least 2.5 million bpd in April, before President Donald Trump in May withdrew the United States from a 2015 nuclear deal with Iran and re-imposed sanctions. The figure also marks a further fall from 1.6 million bpd in September.

Last week, Saudi Arabia, the biggest producer among the Organization of the Petroleum Exporting Countries (OPEC), announced plans to lift crude output next month to 10.7 million bpd, a record.

“Iranian barrels are declining fast, and Saudi Arabia’s promise to balance will face a reality check in a month’s time,” J.P.Morgan said in an oil market note.

Iran’s Oil Minister Bijan Zanganeh on Monday called a Saudi claim that the kingdom could replace Iran’s crude exports “nonsense.”

“Iran’s oil cannot be replaced by Saudi Arabia nor any other country,” Zanganeh said, according to his ministry’s website.

Oil companies operating in the Gulf of Mexico shut down 19 percent of oil production as Hurricane Michael moved toward eastern Gulf states including Florida.

If current forecasts prove accurate, the hurricane would largely miss major producing assets in the Gulf, analysts said, but any change of track could widen the impact.

The International Monetary Fund on Tuesday cut its global economic growth forecasts for 2018 and 2019, saying that trade policy tensions and rising import tariffs were taking a toll on commerce while emerging markets struggle with tighter financial conditions and capital outflows.

Oil rises ahead of U.S. sanctions on Iran, but outlook for 2019 less certain

CNBC

  • U.S. sanctions on Iran are set to go into effect in November.
  • Financial markets have built up large long positions in anticipation of more increases in prices.

Oil prices rose on Friday as traders anticipated a tighter market due to U.S. sanctions against Iran’s crude exports, which are set to start next month.

International benchmark Brent crude oil futures were at $84.98 per barrel at 0504 GMT, up 40 cents, or 0.5 percent from their last close.

U.S. West Texas Intermediate (WTI) crude futures were up 47 cents, or 0.6 percent, at $74.80 a barrel.

The gains helped claw back some of the losses from the previous session due to rising U.S. inventories and after Saudi Arabia and Russia said they would raise output to at least partly make up for expected disruptions from Iran.

“Brent front-month prices are up 6 percent over the last week as it becomes increasingly apparent that Iranian exports could fall below 1 million barrels per day in November,” said U.S. bank Jefferies on Friday.

U.S. sanctions will start targeting Iran’s crude exports from November 4, and Washington is putting pressure on governments and companies globally to fall in line.

“It now appears that only China and Turkey may be willing to risk U.S. retaliation by transacting with Iran,” Jefferies said.

The investment bank said there was currently enough oil to meet demand, but warned that “global spare capacity is dwindling to the lowest level that we can document … meaning any further supply disruptions would be difficult for the market to manage – and could lead to spiking crude oil prices.”

An expectation of tighter markets is fueling bullish financial oil market sentiment.

Financial traders have accumulated bullish long positions betting on a further rise in prices amounting to almost 1.2 billion barrels of oil.

Meanwhile, the number of short positions in the six most important petroleum futures and options contracts has fallen to the lowest level since before 2013, creating a near-record imbalance between bullish and bearish positions in financial crude markets.

“Bullish bets have increased substantially as markets are moving ahead of an impending shortfall from U.S.-Iran sanctions,” said Benjamin Lu of Singapore-based futures brokerage Phillip Futures on Friday.

There are, however, voices of caution.

“While upside price risks will prevail for now, fundamental data outside of Iran has not turned bullish in our view,” Goldman Sachs said in a note to clients dated Oct. 4.

“We expect fundamentals to gradually become binding by early 2019 as new spare capacity comes online … pointing to the global market eventually returning into a modest surplus in early 2019,” the bank said.

And while Goldman said there was still a “robust demand outlook”, there are increasing signs that high oil prices and declining emerging market currencies like India’s rupee or Indonesia’s rupiah are hitting fuel consumption.