Crude oil futures recovered Wednesday morning in European trading as OPEC considers supply cuts amid less stringent US sanctions on Iranian barrels, but bearish sentiment still clouded over the market amid oversupply concerns. At 1200 GMT, ICE January Brent crude futures were up $1.22/b from Tuesday’s settle to trade at $73.35/b, while the NYMEX December light sweet crude contract was 78 cents higher at $62.99/b.
“OPEC might perform a U-turn with new cuts,” head of research at Sucden Financial in London, Geordie Wilkes said Wednesday. “Saudi Arabia and other producers are meeting in Abu Dhabi this weekend to discuss a reaction plan to the waivers the US granted.” The prospect of US waivers on Iranian crude oil granted to eight of Iran’s most important importers has eased market concerns of a supply squeeze in the fourth quarter.
The US intends to be lenient with its exemptions, giving South Korea the permission to import two-thirds of its normal amount of Iranian barrels and India about three quarters, analysts at Commerzbank said in a note Wednesday. Iranian oil exports might roughly total 1.5 million b/d, approximately 1 million b/d less than at their peak, the note added.
“You have OPEC at 33.04 million b/d now. Previous OPEC cut agreements were made when production was at about 34 million b/d,” Wilkes added. “When OPEC supply cuts will materialize is yet to be seen, but the jump in Brent could be the market’s initial reaction to this.”
Sanctions-hit Iran’s accelerating production decline nudged down OPEC’s October crude output to 33.04 million b/d, a 30,000 b/d dip from September’s 22-month high, according to the latest S&P Global Platts survey of analysts, industry officials and shipping data. “This dip was already expected when the sanctions came into force,” Wilkes said.
On the other hand, adding more to the bearish pool, higher US inventories reported by the American Petroleum Institute coupled with comments by the Nigerian oil minister on expected growth in production lent to further weakness. Nigeria’s Emmanuel Kachikwu said that oil production was set to rise to around 2.2 million b/d by early next year with the startup of the 200,000 b/d Egina field, he told S&P Global Platts in an interview Tuesday.
Meanwhile, according to the US Energy Information Administration in its November Short-Term Energy Outlook Tuesday, US oil production was projected to hit 12 million b/d by April and close 2019 at 12.4 million b/d. Platts
