Crude oil futures extend decline as oversupply concerns remain high

10 November, 2018, 11:55 | Author: Billie Castillo
  • Secretary Jeremy Hunt

The Brent crude futures contract for January now points to prices being lower than in February, implying some producers now believe that, with the market oversupplied, it is more worth their while to store oil, rather than sell it.

The decline in prices over the past weeks follows a rally between August and October when crude rose ahead of the re-introduction of sanctions against Iran's oil exports on November 5.

"The presence of Iranian barrels in the physical markets will be superfluous".

One is that, although United States sanctions against Iranian oil exports finally kicked in earlier this week, the impact of those sanctions has been mitigated by the Trump administration's decision to grant "waivers" to eight countries - China, India, Turkey, South Korea, Japan, Italy, Greece and Taiwan - allowing them to continue importing at least some Iranian oil for the next six months. It makes the United States the world's biggest producer of crude. "I see them diversifying towards other markets, for instance, the Saudi one, now under pressure to increase its oil output".

That will have profound implications not just for oil prices but, ultimately, geopolitics. "That's because of me".

China's October crude imports surged 32 per cent from a year earlier to 40.80 million tonnes, or 9.61 million barrels per day (bpd), data from the General Administration of Customs showed on Thursday, climbing from 9.05 million bpd in September.

Brent crude lost 2 percent to $70.65 a barrel in London.

S&P 500 posted its worst monthly drop in seven years.

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"We have seen the U.S. notification, including India in the list of countries, granted significant reduction exemption for the continued purchase of Iranian crude oil without attracting United States sanctions, " External Affairs Ministry spokesperson Raveesh Kumar said at a media briefing. When they meet this weekend, the producers will have to contend not only with the threat of a glut, but also the risk to demand from faltering emerging-market economies and a trade war between the USA and China. That's another reason the producers agreed to increase output earlier this year, partly reversing a policy of limiting supply.

Still, analysts think the scenario will change now that the mid terms are over: Joe McMonigle, analyst at Hedgeye, stated in a note, "OPEC was feeling the Trump pressure but producers took action with the thinking that they just needed to get past the USA election". Iran has said that Trump should learn from his predecessors who policies to target Iran could not work.

Oil markets initially rebounded on Wednesday from their lowest level since August after reports emerged of plans by leading producers Russian Federation and Saudi Arabia to curtail production next year to reverse a recent price plunge.

Oil prices ran up about $7 a barrel in the month before Trump announced he was abandoning a nuclear accord with Iran and restoring sanctions on the Islamic Republic.

West Texas Intermediate crude ended Wednesday's session down 54 cents, or almost 1%, at $61.67, its lowest closing price since mid-March (earlier it touched a almost eight-month low at $61.20 per barrel); Brent was down 13 cents to $72 per barrel.

"Our main cooperation with Iran is upstream investment". Iraq has also received a waiver for the import of electricity from Tehran.

Those fears have since eased, but a committee of OPEC members and allied countries recently warned that producers may begin cutting output once again. It makes the U.S. the world's biggest producer of crude.

On Wednesday, Trump said oil prices could easily spike and suggested his administration could moderate its Iran policy.

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