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Oil prices drop on Iran sanction exemptions, economic concerns

Oil prices slipped on Tuesday, weighed down by exemptions from Washington that will allow Iran’s biggest customers of oil to keep on buying from Tehran, as well as concerns that an economic slowdown might curb fuel demand growth.

The United States West Texas Intermediate (WTI) crude futures were at $62.95 a barrel at 0355 GMT, down 15 cents, from their last settlement.

International Brent crude oil futures were down 28 cents at $72.89 a barrel.

Analysts say that expectations of an economic slowdown in coming months were weighing on the fuel demand outlook, while concerns continued easing on the supply-side after Washington granted 8 importers of Iranian oil sanctions waivers that would allow them to continue the purchases.

Washington gave 180-day exemptions to 8 importers – Japan, India, South Korea, China, Italy, Greece, Turkey, and Taiwan. These are Iran’s top buyers, meaning Iran will still be allowed to export some oil for now.

Jameel Ahmad, head of market research at futures brokerage FXTM said that “the sanctions on Iran have been priced into the oil markets”, and that he would “instead focus heavily more on the global demand outlook because of the ongoing external uncertainties that weigh down on economic prospects.”

Ahmad adds that he saw a slowdown in economic and fuel demand growth as “more of a risk for oil over the coming months.”

Currency weakness is putting pressure on key growth economies in Asia, including Indonesia and India.

On the supply side, oil is in ample availability despite the sanctions against Iran as output from the world’s top three producers, Russia the U.S. and Saudi Arabia, is rising.

The three countries combined produced more than 33 million barrels per day for the 1st time in October, meaning they alone meet more than a third of the world’s almost 100 million bpd of crude oil consumption.

The price pressure on oil has scared off the financial traders.

Hedge fund managers were net sellers of petroleum-linked futures and options for a 5th week running last week as concerns about sanctions on Iran evaporated and investors refocused on economic worries.

According to records published by regulators and exchanges, portfolio managers have been net sellers of 371 million barrels since the end of September, taking their net long position to the lowest level for 15 months.

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