Yemisi Izuora
Brent crude oil prices dropped by more than 1 per cent on Monday after Washington said it may grant waivers to sanctions against Iran’s oil exports next month, and as Saudi Arabia was said to be replacing any potential shortfall from Iran.
International benchmark Brent crude oil futures were at $83.25 per barrel down 91 cents, or 1.1 percent, from their last close, while U.S. West Texas Intermediate (WTI) crude futures were down 57 cents, or 0.8 percent, at $73.77 a barrel.
U.S. sanctions will target Iran’s crude oil exports from Nov. 4, and Washington has been putting pressure on governments and companies worldwide to cut their imports to zero.
However, a U.S. government official said on Friday that the country could consider exemptions for nations that have already shown efforts to reduce their imports of Iranian oil.
Hedge funds cut their bullish wagers on U.S. crude in the latest week to the lowest level in nearly a year, data showed on Friday.
Further weighing on prices, Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore, said there was also “chatter that Saudi Arabia has replaced all of Iran’s lost oil”.
But Innes warned that limited spare production to deal with further supply disruptions meant “the capacity is quickly declining due to Asia’s insatiable demand”.
The U.S. oil drilling rig count fell for a third consecutive week, as rising costs and pipeline bottlenecks have hindered new drilling since June.
Drillers cut two oil rigs in the week to Oct. 5, bringing the total count down to 861, energy services firm Baker Hughes said in its weekly report on Friday.
That is the longest streak of weekly cuts since October last year.
With Iran sanctions still on the table, potential spare capacity constraints and also a slowdown in U.S. drilling, U.S. bank J.P.Morgan said in its latest cross-asset outlook for clients.