Oil dives into a well-supplied market and Iran sanctions exemptions

SINGAPORE (Reuters) – Oil prices eased on Wednesday, as higher production and the renouncement of US sanctions allowing Iran's biggest buyers to continue to take crude oil boosted the prospects for a well-supplied market.

The Brent crude futures contract at the beginning of the month, LCOc1, was $ 71.83 per barrel at 7:50 am GMT, down 30 cents (0.4%) from their last close. .

CLc1 crude for West Texas Intermediate (WTI) crude in the United States was $ 61.84, down 37 cents or 0.6%.

Brent and WTI fell 17.4% and 19.7% respectively from the four-year highs in October.

The US bank J.P. Morgan said that "the sale of oil was due to excessive crude" production rising "while the Iranian supply was still on the market".

Washington has re-imposed Monday sanctions against Iranian oil exports, but granted waivers to its largest customers, allowing limited imports for the next 180 days.

Refinitiv data showed that Iranian exports fell to 1 million barrels per day (bpd) to November, compared to about 3 million bpd in mid-2018.

But the Iranian bid is expected to rise after November, with waivers being used to start ordering more Iranian oil.

"The waivers will likely be more extensive than expected in the market," said energy consulting firm FGE, saying the waivers would globally export between 1.2 and 1.7 million bpd.

Japanese refiner JXTG Holdings announced on Wednesday that it could resume orders for Iranian oil in December.

In China, a fleet of super-tankers carrying about 9 million barrels of Iranian oil worth about $ 650 million is outside the port of Dalian.

Shipping data indicate that most ships have arrived in the last 30 days, with Iran attempting to bring as much rough into the markets as possible before the sanctions come into effect.

"With waivers, prices can be managed in a range of $ 70 to $ 80 a barrel, with a rise of about $ 85 a barrel and a $ 65 a barrel limitation," FGE said.

For Iran, however, the waivers mean that he will probably not receive any direct income from his sales because the United States freezes the money.

"Any of these payments based on oil waivers by exempt countries must be credited to third party accounts". L & # 39; money

will not go directly to Iran and it can only be used to buy certain unauthorized products from its crude oil exporters, "Morgan said.

WAVE OF SUPPLY

Beyond Iran, the US bank Morgan Stanley said that "the supply continues to exceed expectations, especially that of the United States, OPEC Middle East, Russia and Libya. ".

Production of the world's top three producers, Russia, the United States and Saudi Arabia, surpassed 33 million bpd for the first time in October. These three countries now account for more than a third of global consumption.

Iraq, the second largest producer in the Organization of the Petroleum Exporting Countries (OPEC), plans to increase production to 5 million barrels per day in 2019, compared with 4.6 million barrels per day.

Observing the wave of new offers, Morgan Stanley has lowered its Brent price forecast for the first year and the first half of 2019 from 85 USD to 77.50 USD per barrel.

Inventories are also swelling.

US stocks of crude rose 7.8 million barrels during the week ending Nov. 2 to 432 million, according to data from the American Petroleum Institute published Tuesday.

According to J.P.Morgan "floating global storage has increased by 3.6 million barrels since July 18 to reach 33.9 million barrels".

Despite the well-stocked market, JP Morgan still warned that "the risk of supply remains very high" due to the geopolitical risk and the "lack of available capacity".

Part of this risk comes from Venezuela, where crude production is in "free fall" and could soon fall below the 1 million bpd mark, said Tuesday the executive director of the International Oil & Gas Agency. energy, Fatih Birol, against more than 2 million bpd in average year.