Oil prices rise on signs Iranian crude exports are falling further in October

CNBC

  • Iran’s exports of 1.33 million barrels per day of crude oil in the first two weeks of October, according to data from Refinitiv Eikon.
  • Meanwhile, Saudi Arabia continues to face political pressure over the disappearance of journalist Jamal Khashoggi.

Oil prices rose on Tuesday on signs Iranian oil exports this month have fallen from September ahead of U.S. sanctions against Tehran that are set to start in November.

International benchmark Brent crude for December delivery rose 27 cents, or 0.33 percent, to $81.05 per barrel by 0325 GMT.

U.S. West Texas Intermediate crude for November delivery was up 12 cents at $71.90 a barrel.

Iran has exported 1.33 million barrels per day (bpd) to countries including India, China and Turkey in the first two weeks of October, according to Refinitiv Eikon data. That was down from 1.6 million bpd in September, the data showed.

The October exports are a sharp drop from the 2.5 million bpd exported in April before U.S. President Donald Trump withdrew from a multi-lateral nuclear deal with Iran in May and ordered the re-imposition of economic sanctions on the country, the third-largest producer among the members of the Organization of the Petroleum Exporting Countries (OPEC).

The sanctions on Iran’s petroleum sector will go into effect on Nov. 4.

“Uncertainties will remain until Nov. 4 when it would be clear whether the United States would want to cut Iran oil exports to zero or grant waivers,” said Vincent Hwang, commodity analyst at NH Investment & Securities in Seoul.

“Brent prices are likely stay in the range of $80 a barrel or slightly higher, while WTI prices are likely to be $70-$75 a barrel,” Hwang added.

Crude prices have also been supported by geopolitical tensions caused by the disappearance of a Saudi Arabian journalist in Turkey. Turkish official have alleged Saudi Arabian intelligence officers killed the journalist Jamal Khashoggi on Oct. 2 at the Saudi consulate in Istanbul.

U.S. President Donald Trump threatened “severe punishment” for the kingdom if the journalist is found to have been killed. Trump dispatched Secretary of State Mike Pompeo to Saudi Arabia to meet with the country’s leader King Salman.

Saudi Arabia, the world’s largest oil exporter, has denied the allegation. Saudi Arabian officials said it would retaliate against any actions taken over the Khashoggi case.

With the world’s only sizable spare oil output capacity, Saudi Arabia is expected to export more to offset the loss of Iranian oil supply from the sanctions.

Saudi Arabia’s Energy Minister Khalid al-Falih said on Monday at a conference in New Delhi that the kingdom is committed to meeting India’s rising oil demand and is the “shock absorber” for supply disruptions in the oil market.

The country is preparing to admit to causing the death of Khashoggi, according to CNN and New York Times reports on Monday.

“For now, concerns around the disappearance of a Saudi Arabian national appear to be limited to the political sphere,” a Houston-based consultancy Stratas Advisors said in a note.

But WTI prices could fall in the back half of the week, weighed by an increase in U.S. crude inventories, the note said.

U.S. crude stockpiles were forecast to have risen for the fourth straight week by about 1.1 million barrels in the week ended Oct.12, according to a Reuters poll ahead of reports from the American Petroleum Institute (API) and the U.S. Department of Energy’s Energy Information Administration (EIA).

The API’s data is due for publication at 4:30 p.m. EDT (2030 GMT) on Tuesday, and the EIA report is due at 10:30 a.m. EDT (1430 GMT) on Wednesday.

Oil prices climb amid Saudi tensions, but demand outlook drags

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  • Saudi Arabia has been under international scrutiny following the disappearance of a prominent journalist who was a critic of the administration.

Crude oil futures rose on Monday as geopolitical tensions over the disappearance of a prominent Saudi journalist stoked worries about supply, although concerns about the long-term outlook for demand dragged on prices.

Crude markets were also supported in the wake of data that showed South Korea did not import any oil from Iran in September for the first time in six years, before U.S. sanctions against the Middle Eastern country take effect in November.

Brent crude had risen $1.01, or 1.26 percent, to 81.44 a barrel by 0424 GMT, on track for its biggest daily gain since Oct. 9.

U.S. crude futures climbed 80 cents, or 1.12 percent, to $72.14 a barrel, extending gains they racked up on Friday after hefty losses on Wednesday and Thursday.

“The market has again expressed concerns over geopolitical tensions in the Middle East after U.S. and Saudi traded comments over the disappearance of the Saudi journalist, leading to a jump in prices,” Wang Xiao, head of crude research with Guotai Junan Futures, wrote in a research note.

Saudi Arabia has been under pressure since Jamal Khashoggi, a prominent critic of Riyadh and a U.S. resident, disappeared on Oct. 2 after visiting the Saudi consulate in Istanbul.

The kingdom would retaliate against possible economic sanctions taken by other states over the case, its state news agency SPA reported on Sunday quoting an official source.

Meanwhile, South Korea in September stopped importing Iranian oil for the first time in years.

“South Korea’s move to stop Iran oil imports is giving the market confidence on prices,” said Chen Kai, head of research at brokerage Shengda Futures.

Lingering geopolitical worries, trade concerns and a weaker economic outlook may pave the way for another week of volatile trading, Chen said, adding that Monday’s recovery in prices was “fragile”.

Putting downward pressure on oil prices, the International Energy Agency, the West’s energy watchdog, said in its monthly report that the market looked “adequately supplied for now” and trimmed its forecasts for world oil demand growth this year and next.

That comes after the secretary general of the Organization of the Petroleum Exporting Countries (OPEC) last week said the group sees the oil market as well supplied and that it was wary of creating a glut next year.

Oil prices fall as US may grant some waivers on Iran crude sanctions

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  • Oil prices saw declines on Monday following a development on the impending U.S. sanctions on Iran in November.
  • Last Friday, a U.S. government official said the country could potentially grant waivers to the sanctions for nations which already showed efforts to reduce their imports of Iranian oil.

Oil prices fell on Monday after a U.S. government official said Washington was considering granting waivers to its sanctions against Iran’s crude exports next month, and as Saudi Arabia was said to be replacing any potential shortfall from Iran.

International benchmark Brent crude oil futures were at $83.53 per barrel at 0028 GMT, down 63 cents, or 0.75 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were down 39 cents, or 0.5 percent, at $73.95 a barrel.

U.S. sanctions will target Iran’s crude oil exports from Nov. 4, and Washington has been putting pressure on governments and companies worldwide to cut their imports to zero.

However, a U.S. government official said on Friday that the country could consider exemptions for nations that have already shown efforts to reduce their imports of Iranian oil.

Further weighing on prices. Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore, said there was also “chatter that Saudi Arabia has replaced all of Iran’s lost oil”.

But Innes warned that limited spare production to deal with further supply disruptions meant “the capacity is quickly declining due it Asia’s insatiable demand”.

The U.S. oil drilling rig count fell for a third consecutive week, as rising costs and pipeline bottlenecks have hindered new drilling since June.

Drillers cut two oil rigs in the week to Oct. 5, bringing the total count down to 861, energy services firm Baker Hughes said in its weekly report on Friday.

That is the longest streak of weekly cuts since October last year.

With Iran sanctions still on the table, potential spare capacity constraints and also a slowdown in U.S. drilling, U.S. bank J.P.Morgan said in its latest cross-asset outlook for clients that it recommended to “stay long Jan ’19 WTI on supply risks to crude”.

Oil falls as Saudi and Russia quietly agree to output rise, US stocks swell

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  • Saudi, Russia agreed output rise without telling OPEC, according to sources.
  • On Wednesday, data from the Energy Information Administration showed that U.S. crude inventories rose by nearly 8 million barrels in the previous week to around 404 million barrels.

Oil prices on Thursday fell from four-year highs reached the previous session, pressured by rising U.S. inventories and after sources said Russia and Saudi Arabia struck a private deal in September to raise crude output.

Brent crude oil futures were trading at $85.85 per barrel at 0104 GMT, down 44 cents, or 0.5 percent, from their last close.

Brent on Wednesday hit a four-year high of $86.74 a barrel.

U.S. West Texas Intermediate (WTI) crude futures were down 30 cents, or 0.4 percent, at $76.11 a barrel.

“Data for last week showed a much more significant than expected … build in U.S. commercial crude (inventories), which generally suggests that oil prices should tumble,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.

U.S. crude oil stocks rose by nearly 8 million barrels last week to about 404 million barrels, the biggest increase since March 2017, Energy Information Administration data showed on Wednesday.

U.S. weekly Midwest refinery utilization rates dropped to 78.9 percent, their lowest since October 2015, according to the data.

Meanwhile, U.S. crude oil production remained at a record-high of 11.1 million barrels per day (bpd).

“This on top of the other big news of the day from Riyadh that … Saudi Arabia and Russia will boost output,” Innes said.

Russia and Saudi Arabia struck a private deal in September to raise oil output to cool rising prices, Reuters reported on Wednesday, before consulting with other producers, including the rest of the Organization of the Petroleum Exporting Countries (OPEC).

Russia’s and Saudi Arabia’s actions come as markets have heated up ahead of U.S. sanctions against Iran’s oil sector, which are set to kick in from Nov. 4, and which many analysts expect to knock around 1.5 million bpd of supply out of markets.

On the demand side, there is increasing concern that high oil prices and weakening emerging market currencies are creating a toxic inflationary mix that could erode fuel demand and economic growth.

“We have been taking a very close look at the demand signals in the market, and what we have been seeing is not good, JBC Energy said on Wednesday in a note to clients.

The energy consultancy said it had revised its oil demand forecast downwards amid Brent prices above $80 and diving currencies in many emerging markets, as well as burgeoning product stocks and the ongoing Sino-U.S. trade dispute.

“We are not talking about cosmetic changes either. We have cut our forecast for 2018 demand growth by a whopping 300,000 bpd to below 1.1 million bpd,” it said.

Oil prices fall amid surprise growth in US crude stocks

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  • Oil prices pulled back from gains racked up in the previous session, pushed down amid a surprise climb in U.S. crude stockpiles.
  • U.S. crude inventories rose by 1.2 million barrels to 397.1 million in the week to Sept. 14, according to data released on Tuesday by the American Petroleum Institute.
  • Analysts were expecting a decrease of 2.7 million barrels.

Oil prices on Wednesday pulled back from gains racked up the previous day, pushed down amid a surprise climb in U.S. crude stockpiles.

Brent crude futures had dropped 22 cents, or 0.28 percent, to $78.81 per barrel by 0042 GMT, chipping away at Tuesday’s 1.26 percent gain.

U.S. West Texas Intermediate (WTI) crude fell 0.20 percent, or 14 cents, to $69.71 a barrel.

U.S. crude inventories rose by 1.2 million barrels to 397.1 million in the week to Sept. 14, according to data released on Tuesday by the American Petroleum Institute (API). That compared with analyst expectations for a decrease of 2.7 million barrels.

Stockpiles of distillate fuels, which include diesel and heating oil, rose by 1.5 million barrels, the API data showed, compared with expectations for a 651,000-barrel gain.

“The U.S. crude build temporarily grabbed trader attention,” said Chen Kai, head of commodities research at broker Shengda Futures.

“Increasing fuel stocks in the U.S. and strong crude runs could lead to a bigger premium for Brent versus WTI.”

Meanwhile, ministers from OPEC nations and non-OPEC producers are set to meet on Sunday to discuss compliance with output policies. OPEC sources have told Reuters no immediate action was planned and producers would discuss how to share a previously agreed output increase.

OPEC with a group of non-OPEC producers that includes Russia started withholding oil supplies in 2017 to end a global glut and prop up prices.

Bloomberg reported on Tuesday, citing unnamed Saudi sources, that the kingdom was currently comfortable with prices above $80 per barrel, at least for the short term.

Bloomberg reported that while Saudi Arabia had no desire to push prices higher than $80, it may no longer be possible to avoid it. U.S. sanctions affecting Iran’s petroleum sector are due to come into force from Nov. 4.

Elsewhere, the latest escalation in the tit-for-tat trade war between the United States and China stoked worries over global economic growth and demand for oil.

Beijing on Tuesday quickly added $60 billion of U.S. products to its import tariff list in retaliation for President Donald Trump’s planned levies on $200 billion worth of Chinese goods.