Oil wilts on surging production

Russian production has risen to record high of 11.41-million barrels a day in October, up from 11.36-million barrels a day in September.

With Saudi Arabia pumping 10.65-million barrels a day in October, combined output from the top-three oil producers is at a record 33.41-million barrels a day, meaning that Russia, the US and Saudi Arabia meet more than a third of the world’s almost 100-million barrels a day of consumption.

“This surge has driven the market into oversupply,” Jefferies said.

Iran sanctions

Despite surging output, concerns lingered ahead of the start of US sanctions against Iran’s petroleum exports from next week.

Iran’s biggest oil customers, all in Asia, are seeking sanction waivers.

“Potential waivers appear targeted at India and South Korea, and they require some reductions over current import volumes while still allowing oil to flow,” said Clayton Allen of Height Securities.

“We think Trump will agree to China importing some volumes, similar to the treatment that India and South Korea receive,” he said.

Japan is seeking a similar deal.

Despite these efforts, analysts said any potential Iranian oil sanction waivers would likely only be temporary.

“The US may use waivers to slow-walk implementation, but these will not apply indefinitely,” he said.

Goldman Sachs said it expects Iran’s crude oil exports to fall to 1.15-million barrels a day by the end of the year, down from around 2.5-million barrels a day in mid-2018.

“We still expect that the global oil market will be in deficit in the fourth quarter of 2018,” the US bank said.

By the end of 2019, however, Goldman expects Brent to fall to $65 a barrel, largely due to “the unleashing of Permian [US shale] supply growth once new pipelines come online.”

Reuters