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Oil dump in the well-stocked market, Iran's sanction exemption

SINGAPORE (Reuters) – Oil prices were dampened on Wednesday as high productivity and US sanctions, which allowed Iran's largest buyers…

SINGAPORE (Reuters) – Oil prices were dampened on Wednesday as high productivity and US sanctions, which allowed Iran’s largest buyers to continue their strong boost in the prospect of a well-equipped market.

PHILPHOTO – Iraqi villagers guide their fishing boat across Al-Baath oil tankers in Shat al-Arab waters, leading to the port of Umm Qasr, near the country’s second largest city of Basra on February 1

0, 2005. REUTERS / Atef Hassan

Last month Brent crude futures LCOc1 was $ 71.83 per barrel at 0750 GMT, down 30 cents, or 0.4 percent, from their last closing.

US. The West Texas Intermediate (WTI) crude CLc1 was at $ 61.84, down 37 cents, or 0.6 percent.

Brent and WTI have fallen by 17.4 and 19.7 percent, respectively, from their four year-rounds in October.

US. banks J.P. Morgan said that “oil sales were due to excess crude oil” from rising production “while Iranian delivery was still on the market”.

Washington repositioned sanctions on Iran’s oil exports on Monday but granted exceptions to its largest customers, allowing for limited imports for the next 180 days.

Refinitive data showed that Iranian exports have fallen to 1 million barrels per day (BPD) so far in November, from around 3 million bpd in mid 2018.

However, Iran’s supply is expected to increase after November when exceptions are used for to start ordering more Iranian oil.

“Deviations are likely to be more extensive than what the market expects,” the energy consultant FGE found to estimate that overall exemptions would allow 1.2 to 1.7 million bpd of exports.

Japanese refiner JXTG Holdings said on Wednesday that it could resume orders for Iranian oil in December.

In China there is a fleet of super tankers carrying about 9 million barrels of Iranian oil worth $ 650 million outside Dalian port.

Most ships arrived in the last 30 days, delivery data showed, because Iran tried to get as much crude oil as possible to markets before the sanctions came into force.

“With exception, prices can be handled at $ 70- $ 80 a barrel, with upwards of about $ 85 a barrel and the downside limited to $ 65 a barrel,” said FGE.

However, for Iran, the exceptions still mean that there is unlikely to be any direct income from the sale, as the US will freeze the money.

“Some of these exceptions based payments for the oil of the excluded countries must go into escrow accounts … The money

does not come directly to Iran and it can only be used to buy some non-sanctioned goods from their raw export customers, “said JP Morgan.

WAVE OF SUPPLY

In addition to Iran, the US bank said Morgan Stanley continued supplying higher than expected, especially from the US, the Middle East, OPEC, Russia and Libya. “

Output from the World’s Top Three Manufacturers Russia, the United States and Saudi Arabia broke through 33 million bpd for the first time in October. These three countries now face more than a third of global consumption.

Iraq, the second largest producer in the organization of oil producing countries (OPEC) plans to increase production to 5 million bpd in 2019, from 4.6 million bpd at present.

Eyes wave of new delivery reduced Morgan Stanley its year-end and first half of 2019 Brent price forecast from $ 85 per fat to $ 77.50.

Inventories are also swelling.

US raw stocks increased by 7.8 million barrels a week ending November 2 to 432 million, data showed by the American Petroleum Institute on Tuesday. [19659004] JPMorgan said that “global liquid storage space has increased by 3.6 million barrels since July 18 to 33.9 million barrels.”

Despite the well-equipped market, JP Morgan still warned of “risk n delivering remains very high “due to geopolitical risk and a” lack of reserve capacity “.

Part of this risk comes from Venezuela, where raw production is in a “free fall” and can soon fall below 1 million bpd. The International Energy Agency’s Managing Director Fatih Birol said on Tuesday, down from the more than 2 million bpd on average last year.

Reporting by Henning Gloystein; Editing Joseph Radford and Tom Hogue

Our Standards: Thomson Reuters Trust Principles.

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