Oil remains weak amid concern about rising supply

Devin Lawrence
November 10, 2018

Oil prices spiked in early October on fears that US sanctions on Iran would thin out global petroleum supplies.

US West Texas Intermediate (WTI) crude oil futures were at $65.60 per barrel at 0509 GMT, down 4 cents, or 0.1 percent from their last settlement.

Brent crude prices fell over 14 percent this quarter, while USA light crude oil futures slumped more than 20 percent since early October to enter a bear market.

Oil prices dipped on Wednesday as high output and USA sanction waivers allowing Iran's biggest buyers to keep taking its crude reinforced the outlook for a well-supplied market.

The Trump administration on Monday reinstated sanctions on Iran's energy, banking and shipping industries, marking the end of a 180-day grace period the US set for oil buyers to reduce to zero imports from Iran.

Crude futures pulled back midweek as another hefty build in United States inventories helped to ease worries about future supply shortages arising from renewed sanctions against Iran.

Analysts said those countries may be more willing to cut output now that the US midterm elections are over.

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"We have seen the USA notification including India in the list of countries granted Significant Reduction Exemption for continued purchase of Iranian crude oil without attracting United States sanctions", Ministry of External Affairs' (MEA) Spokesperson Raveesh Kumar said.

On Tuesday, the U.S. Energy Information Administration revised its outlook for American oil production for 2019.

"This means that the price is today a greater solver to the crude oil balance than in the past, when there was no solver apart from the supply policy of Saudi Arabia".

Oil prices also fell on an abundance of oil stored in the United States. Trump repeatedly has asked oil producers to pump more crude to lower prices.

For the first time, just three producers - the US, Russia and Saudi Arabia - now account for a third of global oil production and both the latter two have, like the US, been increasing production.

China's October crude imports surged 32 per cent from a year earlier to 40.80 million tonnes, or 9.61 million barrels per day (bpd), data from the General Administration of Customs showed on Thursday, climbing from 9.05 million bpd in September. Domestic production surged to a record 11.6 million barrels a day, while stockpiles at the key storage hub in Cushing, Oklahoma, climbed by 2.42 million barrels. "OPEC and Russian Federation may use cuts to support $70 per barrel", said Ole Hansen, head of commodity strategy at Saxo Bank.

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