Crude oil futures edged higher in the European morning session Friday as the market digested the news that the US will offer waivers to US allies that import Iranian crude, after Brent sank to a low not seen since mid-August on Thursday.
At 1030 GMT, January ICE Brent crude futures were up 23 cents from Thursday’s settle at $73.12/b, while the NYMEX December light sweet crude contract was down 3 cents at $63.66/b.
“The big thing is that the market is trading sideways, developments overnight relative to US waivers were preempted by John Bolton’s comments on Wednesday that the US does not want to harm its allies by the sanctions on Iran,” Harry Tchilinguirian of BNP Paribas Global Markets told S&P Global Platts Friday.
He added: “The US has not gone soft on Iran, waivers are not exemptions, they are temporary, they come in exchange that countries are taking steps to reduce their imports.” The US administration confirmed Wednesday eight temporary waivers would be granted to permit the continued import of Iranian oil, following the reimposition of sanctions. Countries that expect to secure waivers include South Korea, Japan and India, softening the initial anticipated blow of potentially zero exports by November. Nations like India that have refineries that run heavy sour crudes need to find alternative means of supply, such as from Saudi Arabia or Iraq, Tchilinguirian added.
Nonetheless a number of supply growth concerns reverberate around the crude complex for 2019, continuing to weigh on the upside. “Investors should instead look to the supply side: US production reached a new record high in August; Russian production notched a post-Soviet high and OPEC production, driven by Gulf Cooperation Countries and Libya, recovered strongly in October; and Iranian production has held up despite the US’ looming sanctions,” analysts at Goldman Sachs said in a note Friday.
Equally, as well as the loss of Iranian barrels, there is the decline of Venezuela from the export mix, and while Libya production has increased, the country suffers from an “endemic and chronic supply situation,” Tchilinguirian added, saying the combination of these factors will entice more long positioning.
Moreover as winter begins in the Northern Hemisphere there would likely be a boost in demand for heating season. Market participants will also be keeping a lookout on the Baker Hughes US rig count data which will be published later Friday. PLatts.com
