Oil prices were mixed in trading on Tuesday, and gains in US crude prices were pared after US Secretary of State Mike Pompeo said that the US may consider requests from some countries to be exempted from US sanctions on Iranian crude exports. AFP/Getty Images photo by Saul Loeb.
Oil prices up on Norway, Libya supply disruptions
On Tuesday, oil prices rose early in trading, however, gains were pared as the session continued after the United States announced it may consider requests for waivers from sanctions imposed by the Trump administration on Iranian crude exports.
By 1:31 p.m., EDT, Brent crude futures rose 57 cents to $78.64/barrel. Earlier in the session, Brent futures hit a session high of $79.51. US crude futures fell 3 cents to $73.82. The Canadian Crude Index was up 44 cents to $47.22.
Bob Yawger, director of energy futures at Mizuho told Reuters that earlier in the session, oil prices were in striking distance of four-year highs.
However, US Secretary of State Mike Pompeo said on Tuesday that the United States would consider requests from some countries looking to be exempted from the Trump sanctions on Iranian crude imports that are to go into effect in November.
“That basically took the wind out of the sails from the market,” Phil Flynn, analyst at Price Futures Group told Reuters.
“But it isn’t unlike anything that they’ve said before. But it all depends on which countries they’re talking about. Is it big buyers of Iranian crude? Is it India?…Is it temporary waivers?”
Last month, talk from the United States on Iranian crude was much more cut and dried. The US had said it wanted to cut crude exports from Iran to zero by November.
Despite the possibility of these waivers, supply concerns boosted Brent crude prices.
As well, a strike by hundreds of Norwegian offshore oil and gas rig workers began on Tuesday. One Shell-operated offshore field was shutdown after workers had rejected a proposed wage deal.
At 527,000 barrels per day (b/d), Libyan production is now about half what it was in February when the African nation pumped 1.28 million b/d. The National Oil Corporation cites port closures as the reason for the supply shortfall.
And on Monday, oil sands producer Syncrude announced it will not be fully operational until early-to-mid September. Last month, the 360,000 b/d facility was shut down after a power outage. However, the company did report it would resume some production in July, which is earlier than expected.
Yawger said the Syncrude update worked “in the opposite direction of the Norwegian oil workers strike and the geopolitical situation”.
The Syncrude outage had pushed US oil prices higher but the July restart calmed some US crude gains and widened the discount between Brent and US WTI, according to Yawger.
Saudi Arabia’s commitment to boost its production to compensate for the Iranian sanctions has unsettled the market. Analysts and investors are concerned that if the kingdom offsets Iranian supply shortfalls, there will be little spare capacity globally, which could leave the markets vulnerable to continued or unexpected output declines.