United States warns to stay away from Iranian shipping

Crude Oil

"Most of this selling pressure is related to the removal of fears concerning tight supplies from the drop in Iranian exports and the granting of those temporary waivers", said Gene McGillian, a senior analyst and broker at Tradition Energy.

As of 10:18 a.m. EST, WTI front-month crude prices traded at $59.71 per barrel, or a 1.6 percent decline, while Brent front-month crude oil futures traded at $69.63 per barrel, or down 1.4 percent.

The United States is warning other countries not to allow Iranian oil tankers into their territorial waters or ports, saying such access may run afoul of us sanctions and not only incur penalties, but also result in catastrophic economic and environmental damage should an accident occur.

One is that, although U.S. sanctions against Iranian oil exports finally kicked in earlier this week, the impact of those sanctions has been mitigated by the Trump administration's decision to grant "waivers" to eight countries - China, India, Turkey, South Korea, Japan, Italy, Greece and Taiwan - allowing them to continue importing at least some Iranian oil for the next six months.

In the week ending November, the USA crude production hit a whopping 11.6 million bpd, according to Energy Information Administration (EIA) data released on Wednesday.

The U.S. sanctions, meanwhile, are unlikely to cut supply as much as expected. At the same time, nationwide stockpiles rose 5.8 million barrels last week, compared to a 2-million-barrel gain expected in a Bloomberg survey.

The American Petroleum Institute (API) reported a crude oil inventory build this week, this time of 7.83 million barrels for the week ending November 2.

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Russian output in October is put at a record 11.4 million barrels per day - an increase of almost half a million barrels per day since it began ramping up production levels in May.

Meanwhile, EIA expected that USA crude oil production will average 10.9 million barrels per day in 2018, up from 9.4 million barrels per day in 2017, and will average 12.1 million barrels per day in 2019. Over the past few months, OPEC has ratcheted up production amid calls from U.S. President Donald Trump to offset declines in Iranian shipments.

"An analysis of crude export weighted fiscal breakeven price for major gulf economies (Iran, Iraq, Kuwait, Qatar, Saudi Arabia and UAE) suggests optimal price level of ~$70.6/bbl". "The reality is that we're still in a world where we're overproducing and we've got surplus".

The selling pressure around crude oil remains unabated so far this week, intensifying the breakdown of the $62.00 mark per barrel today, levels last seen in March.

But other big oil producers, such as Saudi Arabia, Russia and shale producers in the United States, have increased output steadily, more than compensating for lost Iranian barrels.

"Market sentiment has shifted from the most bullish tone in years with many calling for $100 only weeks ago, to the weakest investor sentiment since the 2016 price trough".

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