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Oil prices ease Wednesday on Iran sanction waivers, adequate supply

Oil prices ease Wednesday on Iran sanction waivers, adequate supply

Mubasher: Oil prices dropped on Wednesday as output is on the rise and Washington’s allowance to Iran’s biggest buyers to keep importing crude from Tehran boosted the outlook for a well-supplied market.

Brent crude oil futures and US West Texas Intermediate (WTI) crude have declined by 17.4% and 19.7%, respectively from recent peaks seen in early October.

US bank J.P. Morgan ascribed oil sell-offs to “excessive crude” from rising production, adding, “Iranian supply was still in the market.”

The US administration has given 150-day exemptions to Iran’s biggest buyers, namely China, India, South Korea, Japan, Italy, Greece, Taiwan and Turkey. This implies that the oil-rich Persian Gulf country will be allowed to still export some oil for now.

Iranian crude exports have thus far retreated to 1 million barrels per day (bpd) in November, compared to around 3 million bpd in mid-2018, according to Refinitiv Eikon data.

However, Iranian supplies are expected to grow after November on the back of the beginning of using waivers to order more Iranian oil shipments.

“Waivers are likely to be more extensive than the market expected,” energy consultancy FGE told Reuters, forecasting waivers overall to allow 1.2 to 1.7 million bpd of exports.

As for oil supplies, US bank Morgan Stanley said that oil supplies keep registering “higher-than-expected” levels, particularly from the US, the Middle Eastern members of the Organization of the Petroleum Exporting Countries (OPEC), along with Russia and Libya.

In the same vein, output from the world’s top-three producers, namely Russia, the US, and OPEC de-facto leader Saudi Arabia, is on the rise.

The combined production of the world’s top-three producers reached as much as 33 million barrels per day (bpd) for the first time in October, meeting as much as a third of the world’s almost 100 million bpd of crude oil consumption.

Moreover, Iraq, OPEC’s second-largest producer, seeks to raise output to 5 million bpd in 2019, from 4.6 million bpd currently.

Fresh supplies have driven Morgan Stanley to slash its year-end and first-half 2019 Brent price forecast from $85 per barrel (pb) to $77.50.

By 6:51 am GMT, US Nymex crude futures fell 0.66% to $61.80 pb, while global benchmark Brent futures went down 0.37% to $71.86 pb.