Oil fell to a six-month low as the US softened its crackdown on Iranian exports and American supplies surged, assuaging fears of an impending shortage. Futures dropped 0.7 per cent in New York, taking the weekly loss to 6.4 per cent, the biggest since February.
The US has agreed to let eight countries — including Japan, India and South Korea — keep buying Iranian oil after it reimposes sanctions to prevent a spike in prices, a senior administration official said. China — the leading importer of Iranian oil — is still in discussions with the US on terms, but is among the eight countries.
Oil’s autumn rally, which culminated in a four-year high last month, has unravelled as a rout in global equities fans concerns that fuel demand will suffer, and prices are now approaching a bear market. Earlier fears that American sanctions on Iran could result in a crude shortage are also receding, as the US shale boom gains new momentum and the Trump administration vacillates on how aggressively to target Iranian exports.
“The market has moved from expectations of massive supply scarcity in the fourth quarter to quite opposite expectations of a looming oversupply,” said Eugen Weinberg, head of commodities research at Commerzbank AG. “The focus has shifted, leading to a sell-off by hedge funds, and that’s causing the slide.”
Brent for January settlement slipped 28 cents to $72.61 (Dh266.5) a barrel on the London-based ICE Futures Europe exchange. The contract is down 6.5 percent in the week, a fourth consecutive week of declines. The global benchmark crude traded at $9.23 premium to WTI for the same month.
Opec increased output by 430,000 barrels to 33.33 million barrels a day in October, the highest since 2016, according to a Bloomberg survey. Saudi Arabia raised production by 150,000 barrels to 10.68 million a day, the highest in Bloomberg data going back to 1962, while Iranian volumes slipped by 10,000 barrels a day to 3.42 million.
“People are less concerned about breaching capacity constraints,” Jeffrey Currie, head of commodities research at Goldman Sachs Group Inc, said. Brent is still set to hit $80 by the end of the year as “we’re just now beginning to see the Iranian cuts begin to impact inventories”.
Oil gets some upward mobility as well in between
Crude had edged higher earlier on Friday after Bloomberg reported that US President Donald Trump wants to reach an agreement on trade with Chinese counterpart Xi Jinping at the Group of 20 summit in Argentina later this month, and has asked key US officials to begin drafting potential terms.
But a senior Trump administration official later dismissed as untrue the media report that President Trump was readying a possible trade deal with China, a CNBC reporter said in a post on Twitter. “There is a long way to go,” on negotiations, the unnamed official told CNBC’s Eamon Javers, according to his tweet. (Agencies)