US sanctions on the Iranian energy sector begin tonight, threatening to cause further tightness in the global market for crude oil.
But from the slide in oil prices in recent weeks, and especially last week, you wouldn’t think the sanctions have been the biggest unknown this year for the market.
Oil prices settled lower on Friday for the day and week. In New York, US West Texas Intermediate futures fell 55 cents, or 0.9%, to settle at $US63.14 a barrel for yet another daily settlement at the lowest since April and off around 6.6% for the week.
Global benchmark January Brent crude futures lost 6 cents, or less than 0.1%, to $US72.83 a barrel on ICE Futures Europe. That was down 6.2% for the week.
In fact and very surprisingly, the prospect of significantly tighter global supplies has resulted in lower prices as the key November 4 date has approached.
That was after an initial surge in prices that saw Brent cross the $US85 a barrel level and forecasts of oil hitting $US100 a barrel once the sanctions started.
President Trump announced on May 8 that he would end the participation of the US in the Joint Comprehensive Plan of Action, a 2015 agreement aimed at curbing Iran’s nuclear activities, signed by Iran, the five permanent members of the United Nations Security Council, and the European Union.
That set the US on a path to reimpose sanctions on Iranian petroleum after a 180-day (6-month) wind-down period for entities to end their dealings with the country’s energy sector.
By early October, oil had climbed to its highest level since 2014 but then strangely prices started tipping lower and front-month futures prices for US benchmark West Texas crude have dropped 17 by Friday’s settlement at $US63.14 a barrel.
That is also down nearly 9% from the day in May President Trump announced the sanctions.
The Trump administration announced on Friday that it plans to allow some countries to continue buying oil from Iran, feeding anxiety over a potential oversupply.
Reuters reported that China, India, South Korea, Turkey, Italy, the United Arab Emirates, and Japan have been top importers of Iran’s oil, while Taiwan occasionally buys cargoes of Iranian crude but is not a major buyer. India and South Korea were also on the list, said a source familiar with the matter who spoke on condition of anonymity. Under US law, exceptions can be granted for up to 180 days
OPEC lifted its production to 33.31 million barrels a day in October, up 390,000 barrels a day from September, according to Reuters and 33.33 million barrels a day according to Bloomberg.
US output reached 11.3 million barrels a day in August, a record monthly level, which also made the country “the leading crude oil producer in the world,” according to the US Energy Information Administration.
The number of active US rigs drilling for oil edging down by 1 to 874 rigs last week, after rising for three weeks in a row.
