US envoy aims to end Iran oil exports without price spike

Muriel Colon
November 10, 2018

Oil markets on Friday remained weak as rising supply and concerns of an economic slowdown pressured prices, with United States crude now down by about 20% since early October.

U.S. West Texas Intermediate crude ended Tuesday's trading session down 89 cents, or 1.4%, to $62.21 a barrel, Kallanish Energy reports.

The January futures for Brent on London's ICE Futures exchange at 12:21 in Kyiv fell by $0,84 (1,19%) to $69,81 per barrel.

Oil's slump has been exacerbated by a US decision to allow eight countries to continue importing from Iran even after it hits the OPEC member with sanctions. When they meet this weekend, the producers will have to contend with not only the threat of a glut, but also the risk to demand from faltering emerging-market economies and a trade war between the USA and China.

Consultant FGE estimated the waivers granted to China, India and six other nations will allow Iran to continue shipping 1.2 million to 1.7 million barrels a day, more than previously expected. However, the Trump administration granted temporary sanctions exemptions to eight countries, allowing Iranian crude exports to continue and easing concern about undersupply.

Crude output hit 11.6 million bpd, a weekly record, though weekly figures can be volatile. The drop marks a stunning reversal from last month, when oil prices hit almost four-year highs as the market braced for potential shortages once USA sanctions on Iran, OPEC's third biggest oil producer, snapped back into place.

"I think that you're going to see even more sanctions coming into play over time and much tighter enforcement of the sanctions", Bolton told reporters in Paris.

The bigger long term picture is that the United States has displaced Saudi Arabia as the world's most important "swing" producer of oil.

Brent crude, the global benchmark, settled down 6 cents to $72.07 a barrel, bouncing off its post-EIA session low on support from earlier reports that Russian Federation and Saudi Arabia are discussing whether to cut crude output next year.

America has already overtaken Russian Federation and Saudi Arabia to become the world's largest producer and figures from the US Energy Information Administration (EIA) suggest it was averaging 11.6 million barrels per day last week.

The first round of USA sanctions, which included cars, carpets, metals trading and access to the United States dollar, entered into force in August.

Russian Federation and Saudi Arabia, top producers in an OPEC-led alliance, started bilateral talks on a return to production cuts next year, Russia's TASS news agency reported, citing an unnamed source. "Opec and Russian Federation may use cuts to support US$70 per barrel", said Ole Hansen, head of commodity strategy at Saxo Bank.

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