Oil traded near a six-month low as the prospects of a tight global market at the end of the year further receded after the U.S. softened the restart of sanctions against Iran.
Crude advanced 0.6% in New York. Sanctions against Iran were reimposed Nov. 5, though eight countries were allowed to continue temporarily buying some crude from the country, according to U.S. Secretary of State Michael Pompeo. Hedge funds reduced bullish bets for an eighth week as extra supplies from OPEC and the U.S. assuaged concerns of a potential shortfall.
“The U.S. has done a U-turn as compared with its previous announcements” on Iran, said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt. “It thus comes as no surprise that speculators are squaring their net long positions in crude oil, which is likewise weighing on prices.”
Oil slid from a four-year high last month as speculation grew that Washington would grant waivers on Iranian sanctions to lower pump prices ahead of the U.S. midterm elections, while other producers in the Organization of Petroleum Exporting Countries pledged to offset any supply gaps. Meanwhile, a trade war between the world’s two biggest economies stoked concern that fuel demand would suffer even as President Donald Trump said he wants to reach a pact with China.
West Texas Intermediate crude for December delivery dropped as much as 1% to $62.52 a barrel on the New York Mercantile Exchange, the lowest since April 9, before recovering 0.6% to $63.52 as of 1:51 p.m. London time. Futures slid 6.6% last week. Total volume traded Nov. 5 was about 4% above the 100-day average.
Brent futures for January settlement rose 71 cents to $73.54 a barrel on the London-based ICE Futures Europe exchange. Prices fell 6.2% last week, the biggest weekly decline in nine months. The global benchmark crude traded at a $9.86 premium to WTI for the same month.
Pompeo told reporters Nov. 5 that China, India, Japan, South Korea, Taiwan, Italy, Greece and Turkey have been granted waivers that will allow the countries to keep buying Iranian oil temporarily. Iran can either change its behavior or see its economy collapse, he said.