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Oil Posts Biggest Weekly Drop Since February as U.S. Approves Iran Waivers

Oil Posts Biggest Weekly Drop Since February as U.S. Approves Iran Waivers© Reuters. Oil drops almost 7% on week as U.S. approves waivers for Iran sanctions.

Investing.com – The Trump Administration seems to be achieving its tri-fold agenda of punishing Iran while balancing the world’s energy needs and keeping oil prices low, as crude markets posted on Friday their largest weekly loss since February.

Eight countries, including Japan, India, South Korea and China, will be given waivers to continue importing oil from Tehran once export sanctions against the Islamic Republic start this weekend, Bloomberg reported. Secretary of State Michael Pompeo confirmed that it will be eight nations, but added that details will be announced on Monday.

Crude oil markets fell further on the news, adding to Thursday’s 3% drop and losses since Monday that culminated in their worst week since February.

U.S. settled down 55 cents lower at $63.14 per barrel. For the week, it lost 6.6%.

U.K. crude, the international benchmark for oil, was down 11 cents at $72.78 by 2:42 PM ET (18:42 GMT). Like WTI, it was also off 6.6% on the week.

Data showing the first weekly drop in four for the didn’t help, with just one rig reported off for this week.

Just a month ago, Brent hit four-year highs above $86 and WTI scaled 2014 peaks of nearly $77. But all that changed in October, with U.S. crude losing 11% and the U.K. benchmark 9%, their most since July 2016.

President Donald Trump has vowed to bring Iran’s crude exports to zero since he canceled an Obama-era deal with Tehran in 2015 that allowed the third-largest exporter in OPEC to continue its oil sales to the world in exchange for curbs on its nuclear program.

But the Trump administration is also aware that choking off about 2 million barrels per day (bpd) of exports averaged by Iran without alternatives will only send oil prices rallying again, as they did in the third quarter. High oil prices could be a problem for the president and his Republican colleagues in U.S. midterm elections due next Tuesday.

Saudi Arabia, OPEC’s top exporter, has said lately that it will pump as much as necessary to keep markets supplied and Russia, another major oil producer, has also said there will be no squeeze. The United States, which basically flooded the world with cheap crude in three previous years, causing a glut, is again ramping up production, reaching a record high of 11.346 million bpd in August.

With the selloff in oil not appearing to be over, some traders think WTI could break below $60 and Brent under $70. Just a month ago, many thought Brent was on track to hit $100 as a momentum-driven rally took oil the other way.

But Wall Street bank Goldman Sachs (NYSE:), an influential voice in energy markets, said it expects Brent to return to its target of $80 per barrel by year end.

“The granting of waivers does not imply that Iran exports will stabilize near current levels,” Goldman said, commenting ahead of Friday’s news.

“As a result, we still expect that the global oil market will be in deficit in 4Q18, leading to a strengthening in Brent timespreads,” it said. “We expect this steeper backwardation to drive spot prices higher to our year-end $80 per barrel forecast, with low positioning also pointing to price upside in the short-term.”

Source: Investing.com

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