US crude drops 6.6% this week, settling at $63.14, as fear of oil shortage fades
Oil prices fell on Friday, posting a fourth consecutive weekly loss, as investors worried about oversupply after the United States said it will temporarily spare eight jurisdictions from Iran-related sanctions.
U.S. Secretary of State Mike Pompeo announced the decision in a conference call. The waivers could allow top buyers to keep importing Iranian oil after economic penalties come back into effect on Monday.
U.S. light crude ended Friday’s session down 55 cents at $63.14, falling 6.6 percent this week.
Brent crude oil was up 2 cents a barrel at $72.91 by 2:26 p.m. ET. The contract has fallen 6 percent this week and 16 percent since the beginning of October, when it reached its highest since 2014.
Pompeo did not name the jurisdictions, but said the European Union as a whole, which has 28 members, would not receive one.
Bloomberg reported that Washington has agreed to let eight countries, including South Korea, Japan and India, continue buying Iranian oil, citing a U.S. official. China, the top importer of Iranian crude, is still in discussions with the U.S. on terms, but is among the eight countries, Bloomberg cited two sources as saying.
Iran said on Friday that it had no concerns over the reimposition of sanctions.
“It seems as though all the worries about tightening supplies due to he loss of Iranian barrels in the market have dried up,” said Gene McGillian, director of market research at Tradition Energy in Stamford, Connecticut.
“On top of that, concerns regarding reduced global demand has also helped … the market continues to search for a bottom.”
Crude drew some support on Friday as world equity markets rallied on hopes the United States and China were mending trade relations. Worries about a U.S.-China trade war had rattled stock markets, weighing on oil prices.
Prices have also been under pressure as world oil production has been rising significantly in the past two months. Russian Energy Ministry data showed on Friday that the country pumped 11.41 million bpd of crude in October, a 30-year high.
The Organisation of the Petroleum Exporting Countries (OPEC) boosted oil production in October to 33.31 million bpd, up 390,000 bpd and the highest by OPEC since 2016.
The United States is challenging Russia for title of top producer, with U.S. crude production now above 11 million bpd.
“U.S. production up, Russian production up, OPEC production up. Now we have eight countries that are going to get waivers,” Mark Scullion, futures and options broker at Eclipse International in New York, told the Reuters Global Oil Forum.
“Even though we’ve had a whole month of lower oil prices, I’m still looking for a bit more downside.”
Goldman Sachs said it expected Iran’s crude oil exports to fall to 1.15 million barrels per day by the end of the year, down from around 2.5 million bpd in mid-2018.