Tag: Iran sanctions

Oil futures climbed yesterday, finding solid footing on higher ground as U.S. sanctions on Iranian oil take hold, though the Trump administration’s decision to grant waivers to eight buyers of the country’s crude has helped to limit the price gains.

The rebound sees crude attempting to bounce back from a sharp October selloff that pushed both the global and U.S. benchmarks into correction territory.

Meanwhile, natural-gas futures jumped by more than seven per cent yesterday dealings, buoyed by expectations that cold weather will lead to a significant lift in demand.

West Texas Intermediate crude for December CLZ8, +0.29 per cent rose 56 cents, or 0.9 per cent, to $63.70 a barrel on the New York Mercantile Exchange. January Brent crude LCOF9, +0.44 per cent the global benchmark, rose $1.05, or 1.4 per cent, to $73.88 a barrel on the ICE Futures Europe exchange.

The renewed sanctions took effect yesterday, but the Trump administration late last week announced it granted waivers to eight countries, which it identified yesterday as China, India, Italy, Greece, Japan, South Korea, Taiwan and Turkey, who can temporarily continue importing Iranian crude.

Other countries not granted the waivers, but that are significant importers of Iranian oil include France, Spain and the United Arab Emirates, said James Williams, energy economist at WTRG Economics.

“The important thing to remember is that those waivers are not 100 per cent but rather some unknown reduction. Some will go to zero eventually,” he said.

In a note, analysts led by Eugen Weinberg, head of commodity research at Commerzbank pointed out that oil futures had been under pressure in recent weeks well before the waivers were granted, with Brent slumping more than 14 per cent over the past four weeks as both it and WTI, the U.S. benchmark, fell into correction mode, widely defined as a fall of 10 per cent from a recent peak. The weakness reflected growing confidence that increased output by Saudi Arabia and Russia would offset much of Iranian crude lost to the sanctions.

“The more than 14 per cent correction that Brent has seen since the beginning of last month illustrates how the market has moved from a place where the loss of Iranian crude was providing maximum support, including to the physical crude market, to a point where the most extreme scenarios for constraints on Iranian crude—including those which had been reiterated for the longest time by U.S. authorities—are now being disregarded even as sanctions formally take effect,” wrote analysts at JBC Energy, a Vienna-based consulting firm.

Oversupply problem returns to the market as US sanctions on Iran set to take effect today

United States granted partial exemptions, known as waivers, to eight governments including India, China, Japan and South Korea, among others on condition that they continue to reduce their imports in the next six months to comply with sanctions, US Secretary of State Michael Pompeo said on Friday.

India, China, South Korea and Japan are some of the biggest importers of Iranian oil and there were market concerns that prices would go up due to oil shortage.

But with the decision of the US government to exempt some countries from Iran sanctions and Opec countries increasing their production, analysts point out that there could be an oversupply problem in the market that may negatively impact oil prices.

“We are currently witnessing a fundamental shift in oil markets from previous apprehensions concerning a supply crunch to now a real concern surrounding oversupply,” said Ehsan Khoman, head of MENA Research and Strategy at MUFG Bank in Dubai.

“The US administration’s waiver allowance for eight countries to import limited amounts of Iranian oil will dampen fears concerning a shortage of supply, which will add further downward bias to oil prices in the near-term.”

‘Growing risk of surplus’

Oil prices were trading lower when markets closed on Friday. Brent, the global benchmark was down by 0.08 per cent at $72.83 (Dh267) per barrel and West Texas Intermediate was at $63.14 per barrel, down by 0.86 per cent.

Oil prices rose in the last few weeks to trade at a four-year high of above $80 per barrel on supply concerns pertaining to Iran sanctions.

Edward Bell, commodity analyst from Emirates NBD also said the news that the US would be granting some waivers to the Iran sanctions is in the near term a negative for oil prices as countries will be able to continue importing some level of Iranian crude. “But it’s important to bear in mind that the waivers will likely be contingent on those countries continuing to cut back on their imports and the waivers will expire in 180 days.”

He also said the risk of a surplus returning is more a feature of demand than sanction waivers. “Most of the major forecasting agencies expect demand to suffer as a result of slower overall economic performance in 2019 and with still elevated paces of supply growth next year there is a growing risk of the oil market moving back into surplus,” said Bell, speaking to Gulf News.

“Our forecast is for oil prices to be trending lower over the course of 2019, expecting an average Brent price of around $73 per barrel next year.”

In similar comments, Jaafar Altaie, managing director of Manaar Energy, said there is no deficit of supply in the market.

An oil well is pictured at sunrise in the Bakken oil fields near Sidney, Montana in this November 2014 handout photo. REUTERS/Smithsonian Channel/Handout via Reuters

Oil prices eased on Wednesday but were still set for a fifth consecutive monthly quarter of gains, driven by an impending drop in Iranian exports in the last three months of the year when global demand heats up.

Brent crude futures were last down 21 cents on the day at $81.66 a barrel by 0923 GMT, having risen to $82.55 on Tuesday, its highest since November 2014.

U.S. crude futures were down 19 cents at $72.09 a barrel.

The United States will apply sanctions to halt oil exports from Iran, the third-largest producer in the Organization of the Petroleum Exporting Countries (OPEC), from Nov. 4.

The pending loss of Iranian supply has been a major factor in the recent surge in crude prices.

Several big buyers of Iranian crude, such as a number of Indian refiners, have signaled they will wind down their purchases, yet the exact impact of the loss of Iranian barrels on the global market balance is not clear.

“Iran has the opportunity to channel oil through Iraq and they will still have some buyers in Asia.

“I’m not totally confident that exports are going to decline by 1 million barrels per day.

“It is quite a big unknown how big the impact will be but we’ve been cautious in calling for a very, very deep cut in exports.

“We think it might be more like 500,000 bpd, rather than 1 million bpd, like in the last round of sanctions,” he said.

Even so, U.S. officials, including President Donald Trump, are trying to assure consumers and investors that enough supply will remain in the oil market and have pushed the likes of OPEC to raise output.

“We will ensure prior to the re-imposition of our sanctions that we have a well supplied oil market,” Washington’s special envoy for Iran, Brian Hook, told a news conference at the United Nations General Assembly on Tuesday evening.

In an earlier speech at the UN, Trump reiterated calls on OPEC to pump more oil and stop raising prices.