WTI Crude Settles in Bear Market, Down 21% From October Peak

WTI Crude Settles in Bear Market, Down 21% From October Peak

The MEA spokesperson said India also appreciated the United States for exempting it from sanctions for the development of the strategically-located Chabahar port in Iran.

The drop marks a stunning reversal from last month, when oil prices hit almost four-year highs as the market braced for potential shortages once US sanctions on Iran, OPEC's third biggest oil producer, snapped back into place.

USA bank J.P. Morgan said "part of the recent sell-off in oil was due to excessive crude in the physical markets.from elevated production from OPEC whilst Iranian supply was still in the market despite reduction in reported exports".

The sanctions aim to isolate Iran by choking off its main source of revenue - oil exports - and they are enforced through the imposition of penalties on companies that continue to do business with Iran.

One is that, although USA sanctions against Iranian oil exports finally kicked in earlier this week, the impact of those sanctions has been mitigated by the Trump administration's decision to grant "waivers" to eight countries - China, India, Turkey, South Korea, Japan, Italy, Greece and Taiwan - allowing them to continue importing at least some Iranian oil for the next six months.

In the USA, crude production increased to 11.6 million barrels per day last week, the highest level on record, according to Energy Information Administration data.

"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.

But Iran supply is expected to rise after November as waivers are used to start ordering more Iranian oil. At the same time, nationwide stockpiles rose 5.8 million barrels last week, compared to a 2-million-barrel gain expected in a Bloomberg survey.

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OPEC's output in October reached the highest level since 2016, while Russian Federation last month pumped 11.4 million barrels a day, a post-Soviet record.

The United States is now the world's biggest crude oil producer, pushing Russian Federation and Saudi Arabia to the back seat.

The market focused on record US crude production and signals from Iraq, Abu Dhabi and Indonesia that output will grow more quickly than expected in 2019. 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. Tehran worries OPEC and non-OPEC countries such as Russian Federation will increase their production to fill the gap in response.

The Iranian crude export that is tracked and reported has come off since the United States announced the re-imposition of sanctions earlier in May, according to the Bank.

Forecasts of a 2019 supply surplus and slowing demand have also dented the market. Last month the Joint Ministerial Monitoring Committee said the group may need to change course and begin cutting production once again.

"I think that you're going to see even more sanctions coming into play over time and much tighter enforcement of the sanctions", Bolton told reporters in Paris.

That will have profound implications not just for oil prices but, ultimately, geopolitics.