CRANBURY, N.J. (DTN) -- Oil futures nearest to delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange retreated overnight into early trading Monday, with West Texas Intermediate and Brent slumping to one-week lows on reports the United States is actively considering granting a waiver from U.S. sanctions on Iranian oil purchases to India.
U.S. sanctions on Iranian oil exports take effect on Nov. 4, but already Iran's oil exports have dropped off by around 700,000 bpd to 800,000 bpd, estimated to have averaged at about 1.5 million bpd in September. Some project Iran's oil exports would slump to 1.1 million bpd by year's end.
U.S. officials have told Iran's oil customers to end those purchases by Nov. 4 or face financial punishment, as Washington seeks to pressure Tehran to end its political and military adventurism in the Middle East that has further destabilized an already volatile region. An initial round of sanctions against Iran took effect in early August. A waiver for India softens the tough approach from Washington, and could open the door for additional waivers.
WTI and Brent were already backpedaling from four-year highs at $76.90 and $86.74 bbl reached on Oct. 3, respectively, with a number of analysts pushing back on forecasts for Brent crude to touch $100 bbl either late this year or in early 2019. They indicate greater production from Saudi Arabia, Russia and the United States, among other smaller producers, would offset the lost supply from Iran and Venezuela, where economic collapse continues to reduce crude production.
In a wide ranging interview with Bloomberg last week, Saudi Arabia's Crown Prince Mohammed Bin Salman said the Saudis along with other countries in the Organization of the Petroleum Exporting Countries and non-OPEC oil producers aligned with OPEC in a production agreement have more than made up for lost Iranian oil sales.
The crown prince said Saudi Arabia's oil production is near a record high at 10.7 million bpd, and the kingdom could increase output by another 1.3 million bpd. Many in the market are skeptical that Saudi Arabia can reach a 12.0 million bpd production rate.
Russia, who leads the non-OPEC contingent partnered with OPEC in their output agreement, late last month reported oil production in September at a post-Soviet high of 11.347 million bpd, and said it would further boost production.
U.S. crude production reached a record high of 11.1 million bpd during the final two weeks of September, according to the Energy Information Administration. Pipeline constraints in western Texas are seen limiting how much more oil U.S. producers can bring to market in the current fourth quarter, when the International Energy Agency projects global oil demand would reach a record high at 100.3 million bpd.
Oil supply is also seen increasing in countries that have experienced declines or volatility in their output rate. ClipperData reported late last week that Libyan oil exports have held near 900,000 bpd for a second month in September after falling to 649,000 bpd in July. The company said Angolan crude exports increased nearly 300,000 bpd in September.
Updated monthly outlooks will be released by the EIA on Wednesday, OPEC on Thursday and the IEA on Friday.
At 9 AM ET, NYMEX November WTI futures were down $0.99 at $73.35 bbl, and near a $73.07 one-week low. ICE December Brent crude was down a little more than $1 at $83.05 bbl, moving off a one-week low at $82.66 bbl.
NYMEX November ULSD futures were down 2.05 cents near $2.3720 gallon, moving off a $2.3586 one-week low. NYMEX November RBOB futures were down 3.05 cents at $2.0555 gallon, paring a decline to a $2.0484 two-week spot low.
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