Oil prices slipped on Tuesday as concerns mounts that an economic slowdown may curb fuel demand growth overshadowed the reintroduction of sanctions on Iran.
International Brent crude oil futures were down 21 cents, or 0.3 percent, at $72.96 a barrel, while the U.S. West Texas Intermediate, WTI, crude futures were at $62.93 a barrel down 17 cents, or 0.3 percent, from their last settlement.
Analysts said expectations of an economic slowdown in coming months was outweighing supply-side risks to crude markets from the reintroduced U.S. sanctions against Iran, which started on Monday.
Hedge fund managers were net sellers of petroleum-linked futures and options for a fifth week running last week as concerns about sanctions on Iran evaporated and investors refocused on economic worries.
The net long position in the six most important petroleum-linked futures and options contracts was cut by a further 73 million barrels in the week to October 30. 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.
Jameel Ahmad, head of market research at futures brokerage FXTM said the “sanctions on Iran have been priced into the oil markets a long time ago”, and that he would “instead focus more heavily on the global demand outlook because of the ongoing external uncertainties weighing down on economic prospects.”
Ahmad added that he saw a slowdown in economic and fuel demand growth as “more of a risk for oil over the coming months.”
Currency weakness is putting pressure on key growth economies in Asia, including India and Indonesia.
At the same time, the trade dispute between the United States and China is threatening growth in the world’s two biggest economies.
On the supply-side, oil is in ample availability despite the sanctions against Iran.
Washington has granted 180-day exemptions to eight importers – China, India, South Korea, Japan, Italy, Greece, Taiwan and Turkey. These are also Iran’s biggest buyers, meaning Iran will be allowed to still export some oil for now.
At the same time, output from the world’s top-three producers, Russia the United States and Saudi Arabia, is rising.
Output from these three countries in October exceeded 33 million barrels per day (bpd) for the first time, meaning they alone meet more than a third of the world’s almost 100 million bpd of crude oil consumption.
Meanwhile, Iran vowed it will sell its oil and break sanctions reimposed by the United States on its vital energy and banking sectors, the country’s President Hassan Rouhani told economists at a meeting broadcast live on state television on Monday.
“America wanted to cut to zero Iran’s oil sales … but we will continue to sell our oil … to break sanctions,” Rouhani said.
In May, US President Donald Trump pulled Washington out of world powers’ 2015 nuclear deal with Iran and reimposed a first round of sanctions on Iran in August.
The deal saw most international financial and economic sanctions on Iran lifted in return for Tehran curbing its disputed nuclear activity under UN surveillance.