India examining details of exemptions on buying oil form Iran

India examining details of exemptions on buying oil form Iran

India examining details of exemptions on buying oil form Iran

Iran has mocked the U.S. sanctions.

Speaking in Madrid after a meeting with his Spanish counterpart Josep Borrell, the Russian foreign minister said Washington had used "unacceptable methods" to exert pressure on operators of the Belgian-based SWIFT global payment network to cut off Iranian banks.

That is around half of what it has been buying daily from Tehran, on average, since the beginning of 2016.

The United States, Russia and Saudi Arabia are all now pumping at or near record highs, producing more than 33 million barrels per day (bpd), a third of the world's oil. And, in any case, any shortfall in supplies from Iran is likely to be more than covered by supplies from elsewhere.

In the US, crude production increased to 11.6 million barrels per day last week, the highest level on record, according to Energy Information Administration data.

USA crude stockpiles have increased for seven consecutive weeks and those are likely to be added to. At the same time, nationwide stockpiles rose 5.8 million barrels last week, compared to a 2-million-barrel gain expected in a Bloomberg survey.

Refinitiv data showed Iranian exports have fallen to 1 million barrels per day (bpd) so far in November, down from around 3 million bpd in mid-2018. Portfolio managers have been net sellers of 371 million barrels since the end of September, taking their net long position to the lowest level for 15 months, according to records published by regulators and exchanges. That supply overhang trumped indications OPEC may discuss production cuts as soon as this weekend.

"An analysis of crude export weighted fiscal breakeven price for major gulf economies (Iran, Iraq, Kuwait, Qatar, Saudi Arabia and UAE) suggests optimal price level of ~$70.6/bbl".

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So the supply story is robust.

"The market is now going to look to OPEC and non-OPEC producers to rein in production as the US has granted eight countries waivers from sanction, which in essence adds to supply", said Andrew Lipow, president of Lipow Oil Associates in Houston. A collision between an oil tanker and a military frigate off Norway's coast temporarily shut down the nation's largest crude-export terminal, halted the pumping of several North Sea grades, and boosted immediate natural gas prices in the United Kingdom.

Forecasts of a 2019 supply surplus and slowing demand have also dented the market.

The market is assuming that, in the short term, prices will carry on falling.

Trump has been gradually re-imposing USA sanctions on Iran, now focused on the oil, shipping and banking industries, after pulling the United States out of the 2015 Iran nuclear deal earlier this year.

Crude barrels seen weakening further, WTI clipping into 60.45. Since the EIA report is positively correlated with API, can we expect EIA to report a build in inventories? "The global supply and demand balance does not look very tight next year".

That will have profound implications not just for oil prices but, ultimately, geopolitics.

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