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.

Oil firm on Iran sanctions, but rising US supply and strong dollar weigh

CNBC

  • U.S. commercial crude stocks rise by 907,000 barrels — API.
  • U.S. crude production to end 2018 at 11.3 million barrels per day — Barclays.

Oil prices were firm on Wednesday on expectations of tighter markets once U.S. sanctions target Iran’s petroleum industry from next month, although a strong dollar and rising U.S. crude supply curbed gains.

Brent crude oil futures were at $84.86 per barrel at 0340 GMT, up 6 cents from their last close.

U.S. West Texas Intermediate (WTI) crude futures were up just 1 cent at $75.24 a barrel.

Traders said global oil markets remained tense because of the looming U.S. sanctions against Iran’s oil exports, which kick in from Nov. 4.

Brent and WTI earlier this week both reached levels last seen in November 2014, and the two contracts have risen by around 20 and 17 percent respectively since mid-August.

Despite this, traders said prices were held back by a strong dollarwhich makes oil imports more expensive for countries using other currencies domestically, as well as by climbing supply in the United States.

U.S. commercial crude inventories rose by 907,000 barrels in the week to Sept. 28 to 400.9 million, the private American Petroleum Institute (API) said on Tuesday. Refinery crude runs fell by 158,000 barrels per day (bpd), API data showed.

Official weekly government data is due from the Energy Information Administration (EIA) on Wednesday.

Traders said the rising stocks were partly due to a relentless increase in U.S. crude oil production, which has jumped by a third since mid-2016 to a record 11.1 million bpd.

“We expect U.S. crude production to exit the year at 11.3 million bpd,” Barclays bank said in a note on Tuesday.

That would mean the United States challenges Russia as the world’s biggest crude oil producer.

On the demand side, fuel consumption is strong, growing especially fast in Asia’s emerging economies.

However, high crude prices, combined with widespread emerging market currency weakness, threaten growth.

“That oil prices are rising to elevated levels at the same time as emerging market currencies hit record lows will be a flashing signal to OPEC members that demand may be at risk of a sharp correction,” said Emirates NBD bank.

Oil firm near 4-year high as Washington’s Iran sanctions loom

CNBC

  • Washington’s Iran oil export sanctions to start Nov. 4.
  • OPEC seen to have little spare capacity to fill Iran loss.
  • High oil price to weigh on growth — HSBC.

Oil markets were firm on Tuesday, with Brent crude prices holding near four-year highs reached the previous day as markets adjust to the prospect of tighter supply once the U.S. sanctions against Iran kick in next month.

International benchmark Brent crude oil futures were at $85.02 per barrel at 0255 GMT, up 4 cents from their last close, and not far off the $85.45 peak reached in the previous session, the highest since November 2014.

Brent has risen by around 20 percent from the most recent lows in August.

U.S. West Texas Intermediate (WTI) crude futures were up 24 cents, or 0.3 percent, at $75.54 a barrel.

WTI is up by about 17 percent since mid-August.

Sentiment was lifted by a last-gasp deal to salvage NAFTA as a trilateral pact between the United States, Mexico and Canada, rescuing a $1.2 trillion a year open-trade zone that had been about to collapse.

More fundamentally, oil markets have been pushed up by looming U.S. sanctions against Iran’s oil industry, which at its most recent peak this year supplied almost 3 percent of the world’s almost 100 million barrels of daily consumption.

Trade data in Refinitiv Eikon showed Iran’s seaborne exports in September were just 1.9 million barrels per day, the lowest level since mid-2016.

“Oil prices continue to climb, supported by the nearing Iran embargo and related supply concerns,” said Norbert Ruecker, head of commodity research at Swiss bank Julius Baer.

“The supply situation looks fragile indeed, as any additional shortfall such as a deterioration of the situation in Venezuela would tighten oil supplies.”

HSBC said in its fourth quarter Global Economics outlook that “our oil analysts believe there is now a growing risk it (crude) could touch $100 per barrel.”

Washington’s sanctions are set to start on Nov. 4, and analysts say there may not be enough spare production capacity in the short-term to meet demand, potentially requiring large storage drawdowns.

“The camp of believers that $100 oil could be reached continues to expand, with spare capacity concerns continuing to grow,” said Brian Kessens, managing director at investment services firm Tortoise.

The Organization of the Petroleum Exporting Countries (OPEC), of which Iran is a member, has struggled to replace export falls from Iran, according to a Reuters survey published on Monday.

With crude prices soaring and many currencies in emerging markets, including India’s rupee and Indonesia’s rupiah declining, analysts warn that economic growth may be eroded.

“U.S. (fiscal) tightening, higher oil prices and ongoing trade frictions are all taking their taking their toll on the growth outlook,” HSBC said.

Brent oil rises to four-year high ahead of Iran sanctions, traders eye more hikes

CNBC

  • Brent crude above $83 ahead of November Iran sanctions.
  • Investors eye $100 Brent — ANZ.
  • High prices, trade disputes threaten demand growth.

Brent crude oil prices rose to their highest since November 2014 on Monday ahead of U.S. sanctions against Iran, the third-largest producer in the Organization of the Petroleum Exporting Countries (OPEC), that kick in next month.

Benchmark Brent crude oil futures rose to as much as $83.27 a barrel and were at $83.21 at 0339 GMT, up 48 cents, or 0.6 percent from their last close.

U.S. West Texas Intermediate (WTI) crude futures were up 32 cents, or 0.4 percent, at $73.57 a barrel.

WTI prices were supported by a report on Friday of a stagnant rig count in the United States, which points to a slowdown in U.S. crude production, which now rivals top producers Russia and Saudi Arabia.

Brent was pushed up by looming sanctions against Iran, which will start targeting its oil sector from Nov. 4.

ANZ bank said on Monday that “the market is eyeing oil prices at $100 per barrel”.

In a sign that the financial market is positioning itself for further price rises, hedge funds increased their bullish wagers on U.S. crude in the week to Sept. 25, data from the U.S. Commodity Futures Trading Commission (CFTC) showed on Friday, increasing futures and options positions in New York and London by 3,728 contracts to 346,566 during the period.

In a further sign of the impact that the U.S. sanctions on Iran will have on the market, China’s Sinopec said its is halving loadings of Iranian crude oil this month. China is the biggest buyer of Iranian oil.

“If Chinese refiners do comply with U.S. sanctions more fully than expected, then the market balance is likely to tighten even more aggressively,” Edward Bell, commodity analyst at Emirates NBD bank wrote in a note published on Sunday.

U.S. President Donald Trump called Saudi Arabia’s King Salman on Saturday, discussing ways to maintain sufficient supply once Iran’s exports are hit by sanctions.

“Until sizable supply is offered up by OPEC, ultimately traders will continue to push the envelope even more,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.

“Even if they (Saudi Arabia) wanted to bend to President Trump’s wishes, how much spare capacity does the Kingdom have?” asked Innes.

“We’re going to find out very soon as approximately 1.5 million barrels (per day) of Iranian oil is effectively going offline on Nov. 4. If the market senses that Saudi Arabia capacity is tapped out at 10.5 million bpd … oil prices will rocket higher with the flashy $100 per barrel price tag indeed a reasonable sounding target,” Innes said.

Looming slowdown?

With oil prices soaring, there are concerns over their inflationary effect on demand growth, especially in Asia’s emerging markets where weakening currencies are further adding to high fuel import costs.

Add the trade disputes between the United States and other major powers, especially China, and economic growth into 2019 could be eroded.

Growth in China’s manufacturing sector already sputtered in September as both external and domestic demand weakened, two surveys showed on Sunday.

In Japan, business confidence among big manufacturers declined in the last quarter its lowest in nearly a year, as firms felt the pinch from rising raw material costs and as global trade conditions worsened.