Oil Advances in Monday Morning Trade

Brian L Milne
By  Brian L. Milne , DTN Refined Fuels Editor

CRANBURY, N.J. (DTN) -- Oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange advanced off multi-month lows early Monday following choppy overnight trading, as a second phase of U.S. sanctions against Iran’s oil exports and banking sector take effect Monday.

U.S. Secretary of State Mike Pompeo said during a news conference on Friday that Iranian oil exports are down 1 million barrels per day (bpd) since May when the United States pulled out of the Joint Comprehensive Plan of Action, automatically reimposing U.S. sanctions that were stayed following the previous round of sanctions from 2012 through 2015.

“This massive reduction since May…is three to five times more than what many analysts were projecting when President Trump announced our withdrawal from the deal back in May,” said Pompeo.

The Secretary of States said the United States will exert “maximum pressure” on Tehran in an effort to change its provocative and destabilizing behavior in the Middle East, and for its pursuit of a nuclear weapon.

Oil futures sold off Friday, accelerating an extended downturn on news the United States granted eight countries waivers from the sanctions that some suggest undermine the effectiveness of the U.S. campaign.

"We expect to issue some temporary allotments to eight jurisdictions, but only because they have demonstrated significant reductions in crude oil and cooperation on many other fronts and have made important moves toward getting to zero crude oil importation,” said Pompeo.

Pompeo said that compares with 20 waivers granted by the Obama administration during the previous sanctions from 2012 to 2015.

“Not only did we decide to grant many fewer exemptions, but we demanded much more serious concessions from these jurisdictions before agreeing to allow them to temporarily continue to import Iranian crude oil,” said Pompeo. “These concessions are critical to ensure that we increase our maximum pressure campaign and accelerate towards zero.”

Monday morning, the U.S. Purchasing Managers’ Index for the services sector for October increased to a more-than-expected 54.8, up from 53.5 in September, on strength in new orders. Institute of Supply Management non-manufacturing index eased from a record high 61.6 in September to a still high 60.3 in October, coming in above market consensus for a 59.1 reading.

The latest data points, with economic data released last week showing ongoing growth in U.S. manufacturing in October despite slowing growth amid tight labor availability and supply change issues, comes ahead of this week’s Federal Open Market Committee. The U.S. dollar softened in early trading Monday from a more than 16-month high midweek last week ahead of the Wednesday-Thursday meeting by central bank officials, with no change in the federal funds rate expected. FOMC in September lifted the baseline borrowing rate 25 basis points to 2.0% by 2.25%.

In early trading, Nymex December West Texas Intermediate futures were up $0.30 near $63.45 per barrel (bbl), reversing off a $62.52 seven-month low on the spot continuous chart traded overnight. ICE January Brent was up $0.55 near $73.40 bbl, holding above Friday’s $72.16 2-1/2 month low on the spot continuous chart with a $72.26 intraday low.

Nymex December ULSD futures were up 2.65 cents near $2.1995, reversing off a $2.1563 2-1/2 month spot low traded overnight. Nymex December RBOB futures were down 0.5 cents near $1.7030 gallon, holding above last week’s $1.6889 8-1/2 month low on the spot continuous chart with a $1.6896 intraday low overnight.

Brian L. Milne can be reached at brian.milne@dtn.com


Brian Milne