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Oil ends lower Monday on talk U.S. waivers on Iran sanctions, but Hurricane Michael limits loss

By Mayra P. Saefong

Petroleumworld 10 08 2018

Oil futures ended lower Monday on reports that the Trump administration was softening its hard line on Iran crude exports and might allow waivers for some buyers when sanctions against the Islamic Republic's crude exports go back into effect in November.

Hurricane-related disruptions to energy production in the Gulf of Mexico, however, limited oil's price decline. A reported explosion at a key oil refinery in Canada also contributed to a rise in gasoline futures.

U.S. benchmark West Texas Intermediate crude for November delivery CLZ8, +0.11%  on the New York Mercantile Exchange fell by a nickel, or less than 0.1%, to settle at$74.29 a barrel, paring earlier losses that had pulled prices to a low of $73.07. Brent crude, the global benchmark, for December delivery LCOZ8, +0.11%  fell 25 cents, or 0.3%, to $83.91 a barrel on ICE Futures Europe—also ending off the day's low of $82.66.

Hurricane Michael was expected to move across the eastern Gulf on Tuesday and inland over Florida Wednesday, according to the U.S. National Hurricane Center . Based on projections from the Energy Information Administration , however, the hurricane was expected to miss the bulk of energy production in the region.

Still, oil and natural-gas operators in the Gulf of Mexico have been taking precautions, evacuating a total of 10 production platforms , or about 1.5% of the 687 manned platforms in the region, the Bureau of Safety and Environmental Enforcement said Monday. Roughly 19% of Gulf oil production and about 11% of natural-gas production have been shut in, the BSEE said. Natural-gas futures also climbed Monday, extending their gains from last week to reach new multiweek highs as U.S. supplies remained below five-year averages. Prices also got a boost from Hurricane Michael's disruptions to Gulf gas output.

November natural-gas futures NGX18, +0.58%  rose 12.4 cents, or 4%, to $3.267 per million British thermal units—again settling at their highest since January.

Oil prices had seen steeper losses early Monday. A U.S. government official said the Trump administration was considering waivers on sanctions for countries that are reducing imports of Iranian oil, Reuters reported on Friday.

“The U.S. appears to be abandoning its tough stance on buyers of Iranian oil,” wrote analysts at Commerzbank. “It appears that consumer countries are to be given more time after all to replace their oil shipments from Iran so long as they at least reduce them significantly.”

India is said to be one of the countries, the Commerzbank analysts noted, and reportedly has plans to buy 9 million barrels of crude from Iran in November, equivalent to 300,000 barrels a day after importing just shy of around 500,000 barrels a day in September. If other consumers, including the European Union, Japan and South Korea are also allowed to continue buying Iranian crude, worries about tightening supply toward year-end could also be soothed, the analysts wrote.

Concerns about the hit to global supply from the reimposition of sanctions have been credited with the run-up in crude prices that took Brent above $86 a barrel to trade at a nearly four-year high last week, while WTI moved above $76.

Brent rose 1.7% last week, while WTI rallied 1.5%.

In other energy dealings, November gasoline futures RBX8, -0.22%  fell 0.4% to $2.094 a gallon, while November heating oil HOX8, +0.00%  added less than 0.1% to $2.394 a gallon.

News of an explosion at Irving Oil's refinery in Saint John, New Brunswick, Canada, a key fuel supplier for the U.S. Northeast provided some modest support to gasoline futures Monday. Irving Oil tweeted that a “major incident” occurred at the refinery early Monday. News reports showed images of an explosion at the plant.


Story by Mayra P. Saefong from MarketWatch.
10 08 2018 19:31 GMT

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