Oil Futures Down 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 continued lower in early morning trade following media reports that the United States will consider offering waivers for limited oil purchases from Iran, and that the Trump administration is eyeing tapping into the Strategic Petroleum Reserve as a way to increase tight world oil supplies and reduce prices, though no confirmation of the SPR tap was available at press time.

Reuters said 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 had advised countries doing business in Iran to unwind business dealings with Iran, including oil purchases, before the Nov. 4 deadline out of fear of financial ramifications.

"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 Monday.

On Friday, July 13, the U.S. denial of a French oil waiver request contributed to higher futures prices.

The U.S. is also eyeing the use of its 600 million barrel (bbl) emergency SPR reserve as a means to reduce oil prices, which peaked at more than $80 bbl from Brent crude in late-May. Reports also are circulating that the Trump administration wants to keep oil prices as low as possible ahead of the November U.S. midterm elections.

Media reports said U.S. President Donald Trump is considering options ranging from a 5 million bbl test sale to as much as a massive 30 million bbl release as a means to increase world oil supplies.

The look into a potential U.S. SPR release, and potential U.S. oil waivers comes amid further domestic strife in Libya, where National Oil Corp. over the weekend shut-in for safety reasons 160,000 barrels per day (bpd) of production at its largest Sharara oil field after an armed abduction of oil workers. It remains unclear at press time how soon the oil might be returned to the market.

Near 9:00 a.m. EDT, the NYMEX August WTI futures contract broke through key resistance at $70 bbl, trading $1.65 bbl less to $69.36 bbl, while the September contract fell $1.74 to $68.21 bbl.

ICE September Brent, slumped $2.16 bbl to $73.17 bbl, while the October contract fell $2.15 bbl to $73.11 bbl.

NYMEX August RBOB contracts were off 5.87 cents per gallon to $2.048 gallon to $2.0492 gallon, while the August ULSD contract was off 4.68 cents per gallon to $$2.0866 gallon.

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