Tuesday, 20 November, 2018

Oil under pressure from rising output, but Iran sanctions loom

Iran's Foreign Minister Zarif speaks during a news conference in Istanbul Iran's Foreign Minister Javad Zarif speaks during a news conference in Istanbul Turkey
Nellie Chapman | 02 November, 2018, 13:44

While futures in NY edged higher on Friday on signs of a possible trade deal between the US and China, they're still on course for a 5.7 percent weekly loss.

"Given these (output) numbers, with Russian Federation pumping hard and the United States and OPEC as well, and we are not really seeing a pickup in demand for another month ... it could indicate we're back to the good old $70-80 range that persisted through April and August", Saxo Bank senior manager Ole Hansen said.

A Wednesday Reuters survey of OPEC production shows the group made up for declines in Iranian shipments in October by boosting production to its highest level since 2016.

"There are two downward pressures on global oil demand growth".

U.S. West Texas Intermediate (WTI) crude futures advanced 55 cents, or 0.9 percent, to $66.73 a barrel on Wednesday. -China trade war. In this case it's "the prospect" of a global slowdown that is driving the price action.

Bloomberg reported that close United States allies South Korea and Japan had received waivers along with India, which relies heavily on supplies from Iran. The contract fell $1.62 to $63.69 on Thursday. Total volume traded was about 0.8 percent below the 100-day average. The contract is down 5.6 percent this week for a fourth consecutive week.

A Chinese official told Reuters that discussions with the United States government were ongoing and that a result was expected over the next couple of days.

The end-of-week bounce wasn't enough to offset losses earlier in the week as speculation mounts that supply is exceeding expectations.

In a presidential memorandum late on October 31, Trump said he determined there was sufficient supply of petroleum and petroleum products in the global market to cushion the impact of a cut in purchases of Iranian oil.

Despite the lower output from Iran, some exports from the Persian Gulf nation will likely continue if the Trump administration officially grants waivers to India, South Korea and potentially others. However, Iran's crude and condensate exports held at 1.9 million bpd in September, according to EIA estimates based on data from ClipperData.

"While the gain in US crude inventories was in line with the market expectation, it's still a sixth consecutive week of increase on the back of rising American production", Takayuki Nogami, chief economist at Japan Oil, Gas and Metals National Corp., said by phone from Tokyo.

WorleyParsons Ltd., the Australian engineering firm that designs massive energy projects, is seeing customers returning to sea - albeit at a more subdued pace.

Meanwhile, US crude oil production surged by 416,000 bpd to a record 11.346 million bpd in August, the US Energy Information Administration (EIA) said in a monthly report this week.