Oil slides to six-month low as supply fears subside
LONDON (Bloomberg) -- Oil fell to a six-month low as the U.S. softened its crackdown on Iranian exports and American supplies surged, assuaging fears of an impending shortage.
Futures dropped 0.7% in New York, taking the weekly loss to 6.4%, the biggest since February. The U.S. has agreed to let eight countries -- including Japan, India and South Korea -- keep buying Iranian oil after it reimposes sanctions this weekend to prevent a spike in prices, a senior administration official said.
Oil’s autumn rally, which culminated in a four-year high last month, has unraveled as a rout in global equities fans concerns that fuel demand will suffer, and prices are now approaching a bear market. Earlier fears that American sanctions on Iran could result in a crude shortage are also receding, as the U.S. shale boom gains new momentum and the Trump administration vacillates on how aggressively to target Iranian exports.
“The market has moved from expectations of massive supply scarcity in the fourth quarter to quite opposite expectations of a looming oversupply,” said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt. “The focus has shifted, leading to a sell-off by hedge funds, and that’s causing the slide.”
West Texas Intermediate for December delivery lost as much as $0.70 to $62.99/bbl on the New York Mercantile Exchange, the lowest since April 9, and traded down $0.43 at $63.26. Total volume traded was 25% above the 100-day average.
Brent for January settlement slipped $0.28 to $72.61/bbl on the London-based ICE Futures Europe exchange. The contract is down 6.5% this week, a fourth consecutive week of declines. The global benchmark crude traded at a $9.23 premium to WTI for the same month.
China -- the leading importer of Iranian oil -- is still in discussions with the U.S. on terms, but is among the eight countries, according to two people familiar with the discussions who also asked not to be identified. The other four that will get waivers weren’t identified and Secretary of State Michael Pompeo will make an announcement on the number of waivers later on Friday.
OPEC increased output by 430,000 bbl to 33.33 MMbpd in October, the highest since 2016, according to a Bloomberg survey of officials, analysts and ship-tracking data. Saudi Arabia raised production by 150,000 bbl to 10.68 MMbpd, the highest in Bloomberg data going back to 1962, while Iranian volumes slipped by 10,000 bpd to 3.42 MMbpd.
“People are less concerned about breaching capacity constraints,” Jeffrey Currie, head of commodities research at Goldman Sachs Group, said in a Bloomberg television interview. Brent is still set to hit $80 by the end of the year as “we’re just now beginning to see the Iranian cuts begin to impact inventories.”
Crude had edged higher earlier on Friday after Bloomberg reported that U.S. President Donald Trump wants to reach an agreement on trade with Chinese counterpart Xi Jinping at the Group of 20 summit in Argentina later this month and has asked key U.S. officials to begin drafting potential terms.
Oil Market News
Turkey is expected to get an exemption from the U.S. allowing it to continue to buy crude from Iran. Russia’s crude and condensate output averaged 11.412 MMbpd last month, according to data from the Energy Ministry’s CDU-TEK unit. That’s a post-Soviet record, and not far off the highest-ever production.
Exxon Mobil delivered its strongest third quarter in four years with a 57% jump in profit, halting a series of disappointing results and joining its European rivals in profiting from rising energy prices. Petoro, the company that manages the Norwegian government’s massive stake in the country’s oil and gas fields, warned that the industry’s costs could be rising for the first time since crude’s collapse in 2014.
