Oil loses ground as US mulls granting waivers on Iran sanctions

Singapore — Brent crude oil prices fell more than 1% on Monday after Washington said it may grant waivers to sanctions against Iran’s oil exports in November, and as Saudi Arabia was said to be replacing any potential shortfall from Iran.

International benchmark Brent crude oil futures were at $83.26 a barrel at 3.52am GMT, down 90c, or 1.1%, from their last close.

US West Texas Intermediate (WTI) crude futures were down 54c, or 0.7%, at $73.80 a barrel.

US sanctions will target Iran’s crude oil exports from November 4, and Washington has been putting pressure on governments and companies worldwide to cut their imports to zero.

However, a US government official said on Friday that the country could consider exemptions for nations that have already shown efforts to reduce their imports of Iranian oil.

In a sign that Iran oil exports will not fall to nothing from November, India will buy 9-million barrels of Iranian crude next month, Reuters reported on Friday.

Hedge funds cut their bullish wagers on US crude in the latest week to the lowest level in nearly a year, data showed on Friday.

Traders said ongoing concerns that the US-Chinese trade war could slow down economic growth also weighed on crude on Monday.

China’s stocks fell sharply on Monday despite an announcement from Beijing at the weekend that it would slash the level of cash that banks must hold as reserves, a sign of underlying investor anxiety over the heated China-US trade war.

Further weighing on oil prices was “chatter that Saudi Arabia has replaced all of Iran’s lost oil”, said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.

But Innes warned that limited spare production to deal with further supply disruptions meant “the capacity is quickly declining due to Asia’s insatiable demand”.

The US oil drilling rig count fell for a third consecutive week, as rising costs and pipeline bottlenecks have hindered new drilling since June.

Drillers cut two oil rigs in the week to October 5, bringing the total count down to 861, energy services firm Baker Hughes said in its weekly report on Friday.

That is the longest streak of weekly cuts since October 2017.

With Iran sanctions still on the table, potential spare capacity constraints and also a slowdown in US drilling, US bank JPMorgan said in its latest cross-asset outlook for clients that it recommended to “stay long Jan 2019 WTI on supply risks to crude”.

Reuters