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Oil slides amid supply spurt, Iran sanction waivers; Brent sheds 14 cents

In China, a flotilla of supertankers carrying around 9 million barrels of Iranian oil worth about $650 million is sitting outside Dalian port

Reuters  |  Sin 

oil, fuel

prices dipped on Wednesday as rising output and US sanction waivers that allow Iran's biggest buyers to keep taking its crude reinforced the outlook for a well-supplied market.

Front-month Brent futures were at $71.99 per barrel at 0552 GMT, down 14 cents, or 0.2 per cent, from their last close.

US Intermediate (WTI) crude was at $61.84, down 37 cents, or 0.6 per cent.

Brent and WTI have slumped by 17.4 and 19.7 per cent respectively from recent peaks touched in early October.

US said the "sell-off in was due to excessive crude" from rising production "whilst Iranian supply was still in the market."

re-imposed sanctions against Iran's on Monday but granted waivers to its biggest customers, allowing them limited imports for the next 180 days.

Eikon data showed Iranian crude exports have fallen to 1 million barrels per day (bpd) so far in November, down from around 3 million bpd in mid-2018.

But supply is expected to rise after November as waivers are used to start ordering more Iranian oil.

"Waivers are likely to be more extensive than the market expected," consultancy said, estimating that waivers overall would allow 1.2 to 1.7 million bpd of exports.

Japan's refiner said on Wednesday it might resume orders of Iranian oil in December.

In China, a flotilla of supertankers carrying around 9 million barrels of Iranian oil worth about $650 million is sitting outside

Most ships arrived in the last 30 days, shipping data showed, as tried to get as much crude as possible into before the sanctions took effect.

"With the waivers, prices can be managed in the $70-$80 per barrel range, with the upside at around $85 per barrel and the downside limited to $65 per barrel," said.

WAVE OF SUPPLY

Beyond Iran, U.S. said "supply continues to come in higher-than-expected, particularly from the U.S., Middle East OPEC, and "

Output from the world's top-three producers Russia, the and Saudi Arabia, broke through 33 million bpd for the first time in October. These three countries now meet more than a third of global consumption.

Iraq, second-largest in the Organization of the Petroleum Exporting Countries (OPEC), plans to raise output to 5 million bpd in 2019, from 4.6 million bpd currently.

Eyeing the wave of new supply, lowered its year-end and first-half 2019 forecast from $85 per barrel to $77.50.

Inventories are also swelling.

U.S. crude stocks climbed by 7.8 million barrels in the week ending Nov. 2 to 432 million, data from the showed on Tuesday.

J.P.Morgan said "global floating storage has increased by 3.6 million barrels since July '18 to 33.9 million barrels."

Despite the well-supplied market, still warned "the risk to supply remains very high" due to geopolitical risk and a "lack of spare capacity."

Part of this risk comes from Venezuela, where crude production is in "free-fall" and could soon drop below 1 million bpd, the International Agency's said on Tuesday, down from the more than 2 million bpd it averaged last year.

First Published: Wed, November 07 2018. 13:27 IST
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