Oil on downward trend as US softens restart of Iran sanctions
OIL TRADED near a six-month low as the prospects of a tight global market at the end-of-year further receded after the US softened the restart of sanctions against Iran.
Crude in New York slipped 0.4 percent, falling for a sixth day. Sanctions against Iran snapped back yesterday, though eight countries were allowed to continue buying some crude from the country, according to US Secretary of State Michael Pompeo.
Hedge funds reduced bullish bets for an eighth week as extra supplies from Opec and the US assuaged concerns of a potential shortfall.
“The US has done a U-turn as compared with its previous announcements” on Iran, said Carsten Fritsch, an analyst at Commerzbank in Frankfurt. “It thus comes as no surprise that speculators are squaring their net long positions in crude oil, which is likewise weighing on prices.”
Oil slid from a four-year high last month as speculation grew that Washington would grant waivers on Iranian sanctions to lower pump prices ahead of the US midterm elections, while other producers in Opec pledged to offset any supply gaps. Meanwhile, a trade war between the world’s two biggest economies stoked concern that fuel demand would suffer even as President Donald Trump said he wants to reach a pact with China.
West Texas Intermediate (WTI) crude for December delivery dropped as much as 1 percent to $62.52 a barrel on the New York Mercantile Exchange, the lowest since April 9, and traded at $62.87 as of 10.35am London time.
A sixth daily decline would mark the longest losing streak in nine months. Futures slid 6.6 percent last week. Total volume traded yesterday was about 5 percent below the 100-day average.
Brent futures for January settlement dropped 11 cents to $72.72 (R1 037.70) a barrel on the London-based ICE Futures Europe exchange. Prices fell 6.2 percent last week, the biggest weekly decline in nine months. The global benchmark crude traded at a $9.71 premium to WTI for the same month.
A day before US sanctions on Iran’s energy and shipping industries were due to be reimposed, Pompeo said on “Fox News Sunday” that the president’s “policy of maximum pressure would be fully in place” yesterday.