Oil drops below $83 on expectations Iran will maintain
some exports
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[October 08, 2018]
By Alex Lawler
LONDON (Reuters) - Oil dropped below $83 a
barrel on Monday, pressured by expectations that some Iranian oil
exports will keep flowing after the U.S. reimposes sanctions, easing a
strain on supplies.
Two companies in India, a big buyer of Iranian oil, have ordered barrels
in November, India's oil minister said on Monday. The Trump
administration is considering waivers on sanctions, a U.S. government
official said on Friday.
"One way or another, it looks as though India is going to take some
Iranian crude," said Olivier Jakob of Petromatrix, adding that the
development was helping oil to "retrace some of the price surge we saw
last week."
Brent crude, the international benchmark <LCOc1>, was down $1.38 to
$82.78 per barrel at 1041 GMT. It hit a four-year high of $86.74 last
week.
U.S. crude <CLc1> was down $1.14 at $73.20.
U.S. sanctions will target Iran's crude oil exports from Nov. 4, and
Washington has been putting pressure on governments and companies
worldwide to cut their imports to zero.
"This is one of the single biggest supportive factors for crude," said
analysts at JBC Energy of the U.S. re-imposition of Iran sanctions.
"Having said that, it may well be that we are already in the most
supportive phase coming from this change and the effect will soon begin
to ease."
Oil also dropped as investors focused on rising output from other
producers, such as top exporter Saudi Arabia, to compensate for lower
Iranian supplies which have fallen further in October according to
export data.
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Pump jacks operate in
front of a drilling rig in an oil field in Midland, Texas U.S.
August 22, 2018. Picture taken August 22, 2018. REUTERS/Nick
Oxford/File Photo
Saudi Arabia said last week it plans to raise production in November
from October output of 10.7 million barrels per day (bpd), indicating
Riyadh will be boosting its supply to the highest ever level.
"Chatter that Saudi Arabia has replaced all of Iran's lost oil" is
weighing on prices, said Stephen Innes, head of trading for Asia-Pacific
at futures brokerage Oanda in Singapore.
Concern that the U.S.-Chinese trade war could slow down economic growth
and hit oil demand also weighed on the market, traders in Asia said.
Oil has been supported by concern that the Iranian export loss will
leave a thinner margin of unused production capacity to deal with supply
shocks. The bulk of spare capacity is held by Saudi Arabia.
These concerns remain. Innes warned that limited spare production to
deal with further supply disruptions meant "the capacity is quickly
declining due to Asia's insatiable demand".
(Additional reporting by Henning Gloystein; editing by Jason Neely and
Alexander Smith)
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