An electric pumping unit removes crude oil from a well. (Photographer: Daniel Acker/Bloomberg)

Crude Oil Dips as Saudi Barrels Seen Offsetting Iran Sanctions

(Bloomberg) -- Crude slipped to the lowest in more than two weeks as investors weighed a potential production surge from Saudi Arabia and Russia against concern that Iranian sanctions will trigger a global supply crunch.

Futures in New York fell for a fourth day, closing down 0.3 percent on Monday. While South Korea has become the first of Iran’s top-three oil customers to fulfill a U.S. demand that buyers cut imports to zero, speculation that Saudi Arabia and Russia will fill in any supply gaps helped to wipe away a rally. A trade war between U.S. and China and expectations for a supply rise at the key U.S. storage hub at Cushing, Oklahoma, also pressured the market lower.

Investors will be watching to see if “the Russians and the Saudis continue to put more oil on the market. That will basically negate some of the worries about tightening supply,” said Gene McGillian, manager of market research at Tradition Energy. At the same time, Trump’s fresh tariff threats don’t really “sit well with the demand side of the market.”

Crude Oil Dips as Saudi Barrels Seen Offsetting Iran Sanctions

While China and India, larger consumers, curbed buying from the OPEC producer, South Korea went a step further by halting purchases before the U.S. imposes sanctions on the Islamic republic on Nov. 4. Meanwhile, U.S. President Donald Trump doubled down on his threats to impose higher tariffs on China’s goods, saying on Friday he’s ready to tax all imports on short notice.

West Texas Intermediate for October delivery dropped 21 cents to settle at $67.54 a barrel on the New York Mercantile Exchange. Total volume traded Monday was about 11 percent below the 100-day average.

Cushing Increase

In the U.S., crude stockpiles at Cushing, Oklahoma, increased 900,000 barrels last week, according to a forecast compiled by Bloomberg. That would be a fifth straight weekly rise in supplies if the Energy Information Administration confirms it on Wednesday.

Front-month WTI crude futures shrunk to a 13-cent premium to its second-month contract, the smallest premium since June.

“If Cushing continues to build, the spreads are going to get weaker,” said Tariq Zahir, a commodity fund manager at Tyche Capital Advisors LLC.

Brent for November settlement rose 54 cents to end the session at $77.37 a barrel on the ICE Futures Europe exchange. Brent’s premium to the U.S. marker is at the widest since late June, with the global benchmark trading at a $9.96 premium to WTI.

Meanwhile, in Libya, the National Oil Corp. will carry out operations as usual across the country after security forces quashed a deadly attack on the state company’s headquarters in the capital Tripoli, the NOC’s chairman said.

Other oil-market news:

  • Gasoline futures slipped 0.6 percent to settle at $1.9592 a gallon.
  • Hurricane Florence’s top winds hit 130 miles (209 kilometers) per hour to become a Category 4 storm, one step below the most severe level, as it pushed toward the U.S. East Coast, where mandatory evacuation orders went into effect.
  • U.S. crude inventories probably slid 2.25 million barrels last week, according to the median estimate of analysts surveyed by Bloomberg.

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