A gas flare burns at Russian oil refinery, operated by OAO Lukoil. in Russia. Picture: BLOOMBERG
A gas flare burns at Russian oil refinery, operated by OAO Lukoil. in Russia. Picture: BLOOMBERG

London — Oil prices declined on Tuesday after Washington granted sanctions exemptions to top buyers of Iranian oil, lifting supply concerns and turning the market’s focus to worries that an economic slowdown may curb fuel demand.

Benchmark Brent crude futures were down 20c at $72.97 a barrel by 9.29am GMT. US West Texas Intermediate (WTI) crude futures were at $62.98 a barrel, down 12c from their last settlement.

Washington gave 180-day exemptions to eight importers: China, India, South Korea, Japan, Italy, Greece, Taiwan and Turkey. This group takes as much as three quarters of Iran’s seaborne oil exports, trade data shows, meaning Iran will still be allowed to export some oil for now.

Iran’s crude exports could fall to little more than 1-million barrels per day (bpd) in November, roughly a third of their mid-2018 peak. But traders and analysts say that figure could rise from December as importers use their waivers.

China was given a waiver to import about 360,000 bpd from Iran during the exemption period, sources told Reuters, while South Korea was given a daily quota of about 130,000 bpd, according to Platts.

Japan said on Tuesday that it would soon raise imports from Iran in accordance with the waivers.

On Monday, the US restored sanctions targeting Iran’s oil, banking and transport sectors and threatened more action to stop what Washington calls its “outlaw” policies, steps Tehran calls economic warfare and vowed to defy.

Meanwhile, concerns about demand continue. The trade dispute between the US and China threatens growth in the world’s two biggest economies and currency weakness is pressuring economies in Asia, including India and Indonesia.

On the supply side, oil is in ample supply, despite the sanctions against Iran, as output from the world’s top three producers — Russia, the US and Saudi Arabia — rises.

The three countries combined produced more than 33-million bpd for the first time in October, meaning they alone meet more than a third of the world’s almost 100-million bpd of crude oil consumption.

Amid ample supply, top crude exporter Saudi Arabia has cut the December price for its Arab Light grade for Asian customers. The price pressure on oil has scared off financial traders.

Hedge fund managers were net sellers of petroleum-linked futures and options last week, taking their net long position to the lowest level in 15 months, according to records published by regulators and exchanges.

Reuters

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