Brent crude oil prices slipped more than 1 percent following Washington’s announcement that it may grant waivers to sanctions aimed at Iran’s oil exports next year. This also comes as Saudi Arabia was reported to be replacing any potential shortfall from Iran.
International benchmark Brent crude oil futures were at $83.26 per barrel, lower 90 cents, or 1.1 percent, from their last close.
US West Texas Intermediate crude futures were down 54 cents, or 0.7 percent, at $73.80 per barrel.
The US sanctions will target Iran’s crude oil export from November 4 and Washington has been pressuring governments and companies across the globe to slash their imports to zero.
On the other hand, according to a government official on Friday, the country could consider exemptions for nations that have already shown efforts to reduce their imports of Iranian oil.
In a sign that Iran oil exports won’t slip to nothing from November, India will buy 9 million barrels of Iranian crude next month, according to a report last Friday.
Traders said that ongoing worries that the US-Chinese trade war could slow down economic growth also dragged down on crude on Monday.
Meanwhile, China’s stocks declined steeply on Monday in spite of an announcement from Beijing over the weekend that it would cut the level of cash that banks must hold as reserves. This was congruent to signs of underlying anxiety over the worsening trade was between the US and China.
Moreover, another drag on oil prices was “chatter that Saudi Arabia has replaced all of Iran’s lost oil.” Said Stephen Innes, who is the head of trading for Asia-Pacific at Oanda, a futures brokerage based in Singapore.
However, Innes cautioned that limited spare production to deal with further disruptions meant “the capacity is quickly declining due to Asia’s insatiable demand.”
The US oil drilling rig count lowered for a third straight week, as rising costs and pipeline bottlenecks have halted new drilling since June.
Drillers cut two oil rigs in the week to October 5, bringing the total count lower to 861, according to energy services firm Baker Hughes in its weekly report on Friday.
That was the longest streak of weekly cuts since October of last year.
As the Iran sanctions still on the table and looming large, potential spare capacity constraints and also slowdown in US drilling, US bank JP Morgan said in its most recent cross-asset outlook for clients that it recommended to “stay long Jan ’19 WTI on supply risks to crude.”