Oil headed for the biggest weekly loss since February as the U.S. softened its crackdown on Iranian exports and American supplies surged, assuaging fears of an impending shortage.
Futures have lost 6 percent in New York this week. The U.S. has agreed to let eight countries — including Japan, India and South Korea — keep buying Iranian oil after it reimposes sanctions this weekend to prevent a spike in prices, a senior administration official said. Prices capped this week’s loss on signs of a possible trade agreement between the U.S. and China.
Oil’s autumn rally, which culminated in a four-year high last month, has unraveled 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 U.S. 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 in Frankfurt. “The focus has shifted, leading to a sell-off by hedge funds, and that’s causing the slide.”
West Texas Intermediate for December delivery lost 5 cents to $63.64 a barrel on the New York Mercantile Exchange at 10:26 a.m. London time, after falling $1.62 on Thursday. Total volume traded was 19 percent above the 100-day average.
Brent for January settlement advanced 32 cents, or 0.4 percent, to $73.21 a barrel on the London-based ICE Futures Europe exchange. The contract is down 5.7 percent this week, a fourth consecutive week of declines. The global benchmark crude traded at $9.41 premium to WTI for the same month.
China — the leading importer of Iranian oil — is still in discussions with the U.S. on terms, but is among the eight countries, according to two people familiar with the discussions who also asked not to be identified. The other four that will get waivers weren’t identified and Secretary of State Michael Pompeo will make an announcement on the number of waivers later on Friday.
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 of officials, analysts and ship-tracking data. 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, the lowest since March 2016.
“The market’s reaction isn’t strongly negative because the U.S. administration hasn’t actually gone soft on Iran,” said Harry Tchilinguirian, head of commodity-markets strategy at BNP Paribas SA. “These are temporary waivers, not exemptions. While it may take longer, substantial Iranian losses appear unavoidable and the outlook for prices remains constructive.”
Crude had edged higher earlier on Friday after Bloomberg reported that U.S. 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 U.S. officials to begin drafting potential terms.
Other oil-market news Russia’s crude and condensate output averaged 11.412 million barrels a day last month, according to data from the Energy Ministry’s CDU-TEK unit. That’s a post-Soviet record, and not far off the highest-ever production. U.S. crude inventories rose by 3.22 million barrels for a sixth week, the longest streak of gains since March 2017, the Energy Information Administration reported Wednesday. Petoro AS, the company that manages the Norwegian government’s massive stake in the country’s oil and gas fields, warned that the industry’s costs could be rising for the first time since crude’s collapse in 2014.
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