Published: Fri, November 09, 2018
Worldwide | By Myra Stephens

Oil dips amid well-supplied market, Iran sanction waivers

Oil dips amid well-supplied market, Iran sanction waivers

A ministerial committee of some OPEC members and allies meets on Sunday in Abu Dhabi to discuss the market and outlook for 2019.

Iran's oil exports have fallen sharply since US President Donald Trump said at mid-year he would reimpose sanctions on Tehran, but with waivers in hand the country's major buyers are already planning to scale up orders again. Perhaps, the trade war sentiment and Iran sanctions waivers are denting the bullish oil sentiment. Pledges by other producers such as Saudi Arabia to pump more and record American supply as well as rising stockpiles also weighed on prices.

The American Petroleum Institute (API) on Tuesday reported a buildup of 7.83 million barrels in the USA crude oil inventories for the week ending November 2. A faster-than-expected inventory buildup dashed speculators' hopes that prices could reach US$100.

Meanwhile, WTI crude oil futures were 0.9% lower to $61.7 per barrel and Brent crude was down 0.1% to $72.1 per barrel. The contract fell 1.6 percent to $60.67 on Thursday, and is headed for a 4 percent decline on the week - its fifth consecutive decrease. A further drop is on the cards for November, with the caveat that tracking Iran's exports has become more hard given that state-owned tankers are turning off their vessel-monitoring systems. The global benchmark crude traded at a US$9.79 premium to WTI for the same month.

Oil prices rose sharply in morning trades after reports suggested that Russian Federation and Saudi Arabia have started bilateral discussions over possible 2019 oil production cuts.

Supply from countries such as Saudi Arabia has risen sharply since June. The report was largely in line with analyst expectations that this week would see another substantial build in crude oil inventories of 2.050 million barrels. OPEC oil shipments will rise by 670,000 barrels a day to 25.79 million barrels a day in the four weeks to November 24 versus the period to October 27, according to data from tanker tracker Oil Movements.

The Joint Ministerial Monitoring Committee (JMMC) and Joint Technical Committee (JTC) were set up as part of a deal between OPEC and other producers led by Russian Federation in late 2016 to curb oil supplies by some 1.8 million barrels per day (bpd). Forecasts of a 2019 supply surplus and slowing demand have also dented the market.

The US Department of State is likely to revise the compliance of the exempted countries in reducing their Iranian exports significantly to allow continued imports from Tehran, according to another analyst.

This group of eight buyers imported over 80 percent of Iran's oil exports past year. It's the second in a series, after an earlier report found that the group's spare capacity reduces oil price volatility and generates as much as $200 billion of annual economic benefits for the world economy.

With WTI Crude now at $61, and asked if USA oil prices could slide to $50, Cramer said on CNBC's "Squawk on the Street" "I could make a case for the $40s here".

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