Oil Futures Lower on Possible Waivers

OLD BRIDGE, N.J. (DTN) -- Oil futures nearest to delivery traded on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange finished sharply lower Monday amid media reports that the United States will consider offering waivers for limited oil purchases from Iran, and that supplies from Russia, the defacto non-OPEC leader, might increase, following Monday's meeting in Helsinki, Finland, between U.S. President Donald Trump and Russia leader Vladimir Putin.

Reuters said early Monday that U.S. Treasury Secretary Steve Mnuchin will consider waivers for countries not able to wind down oil imports from Iran before the Nov. 4 start of renewed U.S. sanctions on Iran, put into effect May 20 after the U.S. pulled out of the 2015 Iranian nuclear accord. Washington earlier advised countries doing business in Iran to unwind all of their business dealings with Iran, including oil purchases, before the Nov. 4 deadline out of fear of financial ramifications. It appears some countries can't do it in time.

On Friday, the U.S. rejected a French request for a waiver to purchase Iranian crude oil, just one of many countries have been told to pull back on doing business in Iran out of fear of financial punishment by the U.S.

"We want people to reduce oil purchases to zero, but in certain cases if people can't do that overnight, we'll consider exceptions," Mnuchin told Reuters on Friday, clarifying some U.S. officials' comments that there would be no exemptions. Mnuchin's comments were embargoed for release until today.

Analysts said today's U.S.-Russia meeting in Helsinki could hold the potential to increase Russian oil production amid supplies recently brought under pressure by continuing supply disruptions in Venezuela, Libya, and Iran, where ongoing civil war has slashed exports as much as 500,000 bpd in June.

"There was really a lot of things going on today that pushed prices lower," said Phil Flynn, senior market analyst with Chicago-based Price Futures group. "You had a lot of talk about oil waivers and tapping the SPR from the U.S. as well as the Trump-Putin visit in Helsinki. So, prudency would suggest that the U.S. and Russia could probably work together on reducing energy prices, so this has put the markets on notice that we could see some more oil hit the markets that we didn't have last week."

The U.S. is eyeing the use of its 600 million bbl emergency SPR reserve as a means to reduce oil prices, which peaked at more than $80 bbl for Brent crude in late-May. Reports continue to circulate that the Trump administration wants to maintain oil price stability heading into the November U.S. midterm elections.

At the 2:30 p.m. EDT settlement, NYMEX August West Texas Intermediate crude futures finished below key support at $70 bbl, settling $2.95 lower at $68.05 bbl, the lowest price since June 25, while ICE September Brent crude futures settled $3.49 bbl lower at $71.84 bbl, the lowest price in nearly three months.

August RBOB gasoline futures sunk 10.45cts gallon to settle at $2.002 gallon, while the August ULDS contract slid 7.91cts gallon to $2.0543 at settlement.

Brian Whary can be reached at brian.whary@dtn.com