Oil slips after USA crude output surges

Secretary Jeremy Hunt

Secretary Jeremy Hunt

Analysts said the main downward price pressure came from rising supply, despite the us sanctions against Iran that were imposed this week, as well as concerns over an economic slowdown.

Front-month Brent crude oil futures LCOc1 were at $70.69 a barrel, 4 cents above their last close.

Russian Federation and Germany have slammed the United States' move to reinstate sanctions against Iran's vital oil exports, shipping and banking, saying Moscow and Berlin would continue trade with Tehran. Meanwhile, U.S. government waivers will allow some of Iran's biggest customers to buy crude from OPEC's No. 3 producer for another six months, damping shortage fears.

The exception granted by Secretary of State Mike Pompeo to USA sanctions reimposed on Iran on Monday also will permit the construction of a railway line from Chabahar port to Afghanistan, and for shipments to the war-torn country of non-sanctionable goods, like food and medicines, the spokesman said.

Landlocked Afghanistan also has few better options for importing petroleum products than Iran for the time being.

When asked on the fate of Chabahar Port after the U.S. reimposed all its sanctions on Iran, the spokesperson said, "This exception relates to reconstruction assistance and economic development for Afghanistan".

Speaking on background Tuesday, a U.S. State Department spokesperson said that Secretary Mike Pompeo had approved carving an exception from sanctions for Iran's Chabahar port. Plans to link the port to the Iranian rail system, which connects to Afghanistan and on to Central Asia, featured in the U.S. State Department's decision.

With the granting of the waivers, it's likely that Iran will be able to keep its exports at least around 1.1 million bpd, and possibly even as high as the 2 million bpd of recent months.

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"Some OPEC members of these two committees have clearly taken sides with the (United States) in imposing its unilateral and unlawful sanctions against". Oil peaked in October on concerns that USA sanctions on Iran that came into force this week would deprive the oil market of substantial volumes of crude, draining inventories and bringing shortages in some regions.

Oil's slide from a four-year high has been fueled by concerns that faltering emerging market economies and a U.S.

According to the data released by the EIA this morning, crude inventories in the USA increased by 5.8 million barrels in the week ended October 2, rising much more than forecasts.

"Bernstein Energy expects "Iranian exports will average 1.4-1.5 million barrels per day (bpd)" during the exemption period", down from a peak of nearly 3 million bpd in mid-2018.

For the Iranians, the 180-day waivers provides them with a financial lifeline and time to try and lobby support from other countries against Washington's sanctions.

"Any serious discussion will be toward the December meeting", the third source said. The outlook for the first half of 2019 is seen subdued as the supply surge is unlikely to be matched by demand growth.

Iran's oil exports rose sharply after the previous round of sanctions were lifted in early 2016.

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