SINGAPORE (Reuters) – The price of oil sank on Wednesday, leading to losses from the previous session. The markets were well supplied and the US sanction waivers allowed Iran's largest customers to continue to buy crude oil.
FILE PHOTO – Iraqi villagers pass their fishing boat past the Al-Baath oil tanker on the Shat-al-Arab waterway, which leads to the Umm Qasr harbor near the country's second largest city in Basra on February 10, 2005. REUTERS / Atef Hassan
Brent crude oil futures LCOc1 averaged 0.85 GMT at 71.85 USD / barrel in the previous month, a decline of 28 cents or 0.4 percent from the last close.
The US West Texas Intermediate (WTI) crude oil futures CLc1 stood at $ 61.76 a barrel. That's a drop of 45 cents, or 0.7 percent, from their last billing.
The increasingly well-supplied market has changed sentiment, which was largely bullish until early October, pushing Brent to a four-year high of more than $ 86 per barrel before Iran sanctions.
Brent and WTI lost 17.4% and 19.7% respectively at the beginning of October from their recent highs.
The US Bank J.P. Morgan said, "Part of the recent sell-off in oil was due to excessive crude oil prices in the physical markets … through OPEC's increased production, while Iranian supply was still on the market despite declining exports."
Fawad Razaqzada, market analyst at futures broker Forex.com, said he had become "rather pessimistic" due to lower forecasts for demand growth, higher supply and no sanctions on Iran.
According to Refinitiv Eikon, crude oil exports in Iran have so far fallen to 1 million barrels a day (bpd) in November. In October, it was almost 2 million bpd and in mid-2018 it was around 3 million bpd.
GRAPHIC: Iran Oil Exports – tmsnrt.rs/2PabBPs
US bank Morgan Stanley said: "Oil market fundamentals have slowed as supply remains higher than expected, especially from the US, the Middle East OPEC, Russia and Libya."
The production of the three largest producers in the world, Russia, the United States and Saudi Arabia, broke through 33 million bpd for the first time in October. This means that these three countries alone account for more than a third of global consumption of nearly 100 million bpd.
Iraq, which is the second largest producer of the Organization of Petroleum Exporting Countries (OPEC) behind Saudi Arabia, is targeting 5 million bpd in 2019, compared to 4.6 million Bpd today, Oil Minister Thamer Ghadhban said Tuesday.
"The market is well supplied and we see a balanced and not a tight market ahead of us. This does not support our forecast for the year of $ 85 a barrel and the forecast for 1H19, "said Morgan Stanley.
Instead, the bank said Brent would expect an average of around $ 77.5 a barrel by mid-2019.
As production increases, stocks increase.
Crude oil inventories in the US climbed 7.8 million barrels to 432 million in the week ending November 2, data from the American Petroleum Institute said Tuesday.
Despite the well-supplied market, Razaqzada warned that "inefficient producers would always be more expensive to keep production up to date".
Venezuela's crude oil production was "in free fall" and could soon fall below 1 million Bpd, warned Fatih Birol, Executive Director of the International Energy Agency, on Tuesday ahead of the over two million BpDs last year.
CHART: Crude oil production in Russia, USA and Saudi Arabia – tmsnrt.rs/2CTwqaq
Reporting by Henning Gloystein; Arrangement of Joseph Radford