Crude oil futures edged down during morning trade in Europe Monday as supply concerns eased on the news that the US would temporarily exempt eight nations from its renewal of sanctions on Iran as well as on increased oil supply from OPEC, Russia and the US in response to the sanctions.
At 1210 GMT, ICE January Brent crude futures were down 16 cents from Friday’s settle at $72.67/b, while the NYMEX December light sweet crude contract was 16 cents lower at $62.98/b.
“The optimism on Brent crude has evaporated. The market is sitting back to see more specifics of the waivers as the information given so far has been foggy and opaque,” analysts at SEB Bjarne Schieldrop said. The US administration said at the end of last week it would temporarily grant eight nations permission to import a limited amount of Iranian oil, following the re-imposition of sanctions Monday. Countries that expect to secure waivers include South Korea, Japan, India, China and Turkey softening the initially expected blow of potentially zero exports by November.
“The equity markets are pulling back quite strongly. Tweets from Donald Trump have made his intentions on the trade war a little confusing, and the pick-up in the Asian equity market seen on Friday is now reversing, they are selling off as a result of this uncertainty,” Schieldrop added.
On the supply side, OPEC is now producing approximately 1 million b/d more than it was in summer, with Russia and the US increasing production by about 400,000 b/d and 300,000 b/d respectively, analysts at Commerzbank said in a note Monday. The attempt to offset supply concerns due to the decrease in oil exports from Iran could lead to an oversupplied market in the current quarter, the note added.
Russian oil production totaled 48.262 million mt in October, up 0.4% month on month, preliminary data from the Central Dispatching Unit, the statistical arm of the energy ministry, showed Friday. Russia increased crude exports by 6.8% month on month to 21.737 million mt or 5.14 million b/d in October, CDU data showed. “You will see a turnaround by mid-November,” Schieldrop said. Despite the increased supply and waivers on Iranian sanctions, a drawdown is expected in US inventories in the coming weeks, analysts at PVM said in a note Monday. Market participants will keep a lookout for inventory data from the American Petroleum Institute and the Energy Information Administration due to be published Tuesday and Wednesday. Platts.com
