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 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.

Oil prices edge up amid uncertainty over fallout from Iran sanctions 

CNBC

  • Markets attempted to ascertain the potential impact of U.S. sanctions on Iran which are due to go into effect on Nov. 4.
  • Iran is the third-largest producer in the Organization of Petroleum Exporting Countries.

Oil prices inched up on Friday, with investors trying to gauge the potential impact on supply from looming U.S. sanctions on Iran’s crude exports.

The most-active Brent crude futures contract, for December, had risen 18 cents, or 0.22 percent, to $81.56 per barrel by 0126 GMT. That was close to a four-year high of $82.55 struck on Tuesday.

With the expiration of the Brent November futures contract later on Friday, the front-month contract will become the December contract.

U.S futures were up 21 cents, or 0.29 percent, at $72.33 per barrel, on track for a weekly gain.

“The market has been focusing on trading headlines on the Iran sanctions for a whole week. But views on how much OPEC and Russia can make up for the losses vary,” said Chen Kai, head of commodity research at Shenda Futures.

The sanctions kick in on Nov. 4, with Washington asking buyers of Iranian oil to cut imports to zero to force Tehran to negotiate a new nuclear agreement and to curb its influence in the Middle East.

Saudi Arabia is expected to quietly add extra oil to the market over the next couple of months to offset the drop in Iranian production, but is worried it might need to limit output next year to balance global supply and demand as the United States pumps more crude.

Two sources familiar with OPEC policy said Saudi Arabia and other producers discussed a possible production increase of about 500,000 barrels per day (bpd) among the Organization of the Petroleum Exporting Countries and non-OPEC allies.

However, ANZ said in a note on Friday that major suppliers were unlikely to offset losses due to the sanctions estimated at 1.5 million bpd.

At its 2018-peak in May, Iran exported 2.71 million bpd, nearly 3 percent of daily global crude consumption. The nation is OPEC’s third-largest producer.

Meanwhile, looming supply from the United States and stable output from Libya were dragging on oil prices, said Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA in Singapore.

Oil prices drop, Brent moves further away from 4-year high

CNBC

  • On Tuesday, Washington’s special envoy for Iran, Brian Hook, told a news conference at the United Nations General Assembly that the U.S. would ensure that oil markets are well supplied before sanctions on Iran are reimposed.
  • U.S. President Donald Trump also restated calls on the Organization of the Petroleum Exporting Countries to raise oil production and curb price increments.

Brent oil edged further away from a four-year high on Wednesday and U.S. crude fell, after the U.S. said it would ensure crude markets are well supplied before sanctions are re-imposed on Iran and as President Donald Trump criticized high prices.

Brent crude futures were down 43 cents, or 0.5 percent, at $81.44 a barrel by 0041 GMT, after gaining nearly 1 percent the previous session. Earlier on Tuesday, Brent hit its highest since November 2014 at $82.55 per barrel.

U.S. crude futures were down 40 cents, or 0.6 percent at $71.88 a barrel. They rose 0.3 percent on Tuesday to close at their highest level since mid-July.

However, Brent is on course for its fifth consecutive quarterly increase, the longest such stretch for the global benchmark since early 2007, when a six-quarter run led to a record-high of $147.50 a barrel.

“We will ensure prior to the reimposition of our sanctions that we have a well supplied oil market,” Washington’s special envoy for Iran, Brian Hook, told a news conference at the United Nations General Assembly.

In a speech at the UN, Trump reiterated calls on the Organization of the Petroleum Exporting Countries to pump more oil and stop raising prices.

He also accused Iran of sowing chaos and promised further sanctions on the OPEC member after restrictions on its oil exports are imposed from early November.

The so-called ‘OPEC+’ group, which includes Russia, Oman and Kazakhstan, met over the weekend to discuss a possible increase in crude output, but the group was in no rush to do so.

Mohammad Barkindo, OPEC secretary general, said in Madrid on Tuesday that OPEC and its partners should cooperate to ensure they do not “fall from one crisis to another”.

Also weighing on sentiment was an industry report showing U.S. crude stocks unexpectedly climbed last week.

Crude inventories rose by 2.9 million barrels in the week to Sept. 21 to 400 million, compared with analyst expectations for a decrease of 1.3 million barrels, the American Petroleum Institute said.