The price of oil fell to spring level

The price of oil fell to spring level

As of 10:18 a.m. EST, WTI front-month crude prices traded at $59.71 per barrel, or a 1.6 percent decline, while Brent front-month crude oil futures traded at $69.63 per barrel, or down 1.4 percent.

Crude oil prices fell Tuesday, briefly entering bear market territory, after the USA said it will allow some of Iran's biggest customers to continue importing the Opec member's crude without violating reinstated US sanctions.

Oil, which closed at a seven-month low in NY on Tuesday, slipped further after an industry report was said to show a larger-than-expected increase in U.S. crude inventories. But, fearing a price spike, it granted Iran's biggest buyers - China, India, South Korea, Japan, Italy, Greece, Taiwan and Turkey - sanctions waivers. However, the Trump administration granted temporary sanctions exemptions to eight countries, allowing Iranian crude exports to continue and easing concern about undersupply. To put that in context, the BP Statistical Review of World Energy 2018 puts global daily crude production at 92.6 million barrels per day for a year ago, so the increase is meaningful.

"The market is now going to look to OPEC and non-OPEC producers to rein in production as the USA has granted eight countries waivers from sanction, which in essence adds to supply", said Andrew Lipow, president of Lipow Oil Associates in Houston.

In the week ending November, the US crude production hit a whopping 11.6 million bpd, according to Energy Information Administration (EIA) data released on Wednesday.


A barrel of U.S. light crude oil, which hit a near four-year high of $76.41 on 3 October, was today trading as low as $60.06, representing a drop of 21%.

But it is not only the United States that has meaningfully raised oil production in recent weeks.

India is also Iran's second-biggest oil customer and will be one of the most exposed to a forced drop in supply because of its relative proximity to Iran.

"An analysis of crude export weighted fiscal breakeven price for major gulf economies (Iran, Iraq, Kuwait, Qatar, Saudi Arabia and UAE) suggests optimal price level of ~$70.6/bbl". "OPEC and Russian Federation may use cuts to support $70 per barrel", said Ole Hansen, head of commodity strategy at Saxo Bank. The EIA expects output to break through 12 million bpd by mid-2019, largely thanks to a surge in shale oil production.

"This means that the price is today a greater solver to the crude oil balance than in the past, when there was no solver apart from the supply policy of Saudi Arabia".

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