Gas flares at the Soroush oil fields behind an Iranian flag in the Persian Gulf, Iran. Picture: REUTERS/Raheb Homavandi
Gas flares at the Soroush oil fields behind an Iranian flag in the Persian Gulf, Iran. Picture: REUTERS/Raheb Homavandi

Singapore — Oil prices fell on Monday as the start of US sanctions against Iran’s fuel exports was softened by waivers that will allow major buyers to continue importing Iranian crude, at least temporarily.

Front-month Brent crude futures were at $72.40 a barrel at 3.32am GMT on Monday, down 43c or 0.6% from their last close.

US West Texas Intermediate (WTI) crude futures were down 46c or 0.7% at $62.68 a barrel.

Brent has lost more than 16% in value since early October, while WTI has declined by more than 18% since then, in part as hedge funds cut their bullish wagers on crude to a one-year low by the end of October, data showed on Friday.

Prices came under pressure as it became clear that Washington was allowing several countries to continue importing crude from Iran despite the sanctions, which officially started on Monday.

The US said on Friday it will temporarily allow eight importers to keep buying Iranian oil.

Washington has so far not named the eight, referred to as “jurisdictions”, a term that might include Taiwan which the US does not regard as a country.

China, India, South Korea, Turkey, Italy, the United Arab Emirates and Japan have been the top importers of Iran’s oil, while Taiwan occasionally buys Iranian crude.

Japan said on Monday it was in close communication with the US. While chief cabinet secretary Yoshihide Suga declined to detail any potential sanction waivers, he said his government had asked Washington that sanctions should not have an adverse impact on Japanese companies.

Oil markets have been preparing for the sanctions for months.

“Iranian exports and production had been declining steadily … Iranian exports show a decline of more than 1-million barrels a day as of October from May," said Edward Bell of Emirates NBD bank.

On the demand side, Bell warned that consumption may be slowing due to an economic slowdown, as seen in a sharp drop in refining profits.

“Sagging refining margins at a time of weak crude prices sends a very telling message to us that demand is underperforming,” he said.

A slowdown in demand would come just as output is rising.

Joint output from the world's top producers — Russia, the US and Saudi Arabia — in October rose above 33-million barrels a day for the first time, up 10-million barrels a day since 2010.

These three countries alone meet more than a third of consumption.

In the Middle East, Abu Dhabi National Oil Company plans to increase its oil production capacity to 4-million barrels a day by the end of 2020, and to 5-million barrels a day by 2030, it said on Sunday, compared with current output of just over 3-million barrels a day.