Oil dropped toward an eight-month low as concerns about a worldwide supply squeeze eased.
Futures fell as much as 2.8 per cent in New York on Monday. American crude stockpiles have been expanding for almost two straight months. Meanwhile, U.S. government waivers will allow some of Iran’s biggest customers to buy crude from OPEC's No. 3 producer for another six months, dampening shortage fears.
“Oil prices don’t have any real reason to rally significantly,” said Phil Streible, senior market strategist at R.J. O’Brien & Associates LLC in Chicago.
Crude has tumbled about 20 per cent since touching a four-year high last month as bearish supply signals around the globe crowded out concerns about disrupted exports from Iran and Venezuela. The waivers announced this week by U.S. Secretary of State Mike Pompeo apply to China, India and six other nations.
“The U.S. has for now given a lifeline to Iran,” said Olivier Jakob, managing director at Petromatrix GmbH in Zug, Switzerland. “The end result of the sanctions is softer than expected. The final outcome of the sanctions also confirms the political fear of high gasoline prices.”
West Texas Intermediate crude for December delivery declined 2.4 per cent to $61.57 a barrel at 11:26 a.m. on the New York Mercantile Exchange after earlier dipping to $61.31, the lowest intraday price since March 16.
Brent futures for January settlement slid $1.63 to $71.54 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $9.71 premium to WTI for the same month.
As criticism increased from American conservatives opposed to the waivers, U.S. President Donald Trump said he didn’t want to shock energy markets by forcing all buyers to halt Iranian oil purchases. The exemptions are temporary measures to ease the transition and avoid destabilizing the market, Pompeo said.
U.S. crude inventories probably rose 2 million barrels last week, according to a Bloomberg survey of analysts. Meanwhile, supplies at the key storage hub in Cushing, Oklahoma, increased by an estimated 2.1 million barrels last week, according to a forecast compiled by Bloomberg.
The American Petroleum Institute is scheduled to release its weekly count of stockpiles later Tuesday, followed by the U.S. government’s tally on Wednesday.