Crude worldwide plunges after questions about oil demand

Crude worldwide plunges after questions about oil demand

Crude oil prices were lower Friday morning amid widespread concern that the market may be oversupplied, with yet another session where the impact of waivers announced Monday lingered.

West Texas Intermediate crude ended Wednesday's session down 54 cents, or almost 1%, at $61.67, its lowest closing price since mid-March (earlier it touched a almost eight-month low at $61.20 per barrel); Brent was down 13 cents to $72 per barrel. "After the U.S. mid-term elections, we would also expect Saudi Arabia and GCC allies to reduce supply slowly to allow the physical markets to absorb the excess crude first (other than Iranian barrels)", said the report.

OPEC and its oil market allies were also concerned that rising prices would shrink demand for oil.

And India, which is Iran's second largest customer, is expected to continue importing around 300,000 barrels per day, representing up to two-thirds of what it buys on an average daily basis. Iranian Vice President Eshaq Jahangiri said, "The Americans constantly said they would reduce the sale of Iran's oil to zero but I have to say that so far, we have been able to sell our required amounts of oil".

"We have seen the United States notification including India in the list of countries granted Significant Reduction Exemption for continued purchase of Iranian crude oil without attracting U.S. sanctions", Ministry of External Affairs' (MEA) Spokesperson Raveesh Kumar said.

However, the rally proved short-lived after the US Energy Energy Information Administration (EIA) reported a build in crude inventories of 5.8 million barrels for the week to 12 November.

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The bigger long term picture is that the United States has displaced Saudi Arabia as the world's most important "swing" producer of oil. "We have worked with the Saudis, the Emiratis, and other producers to make sure production is up so that historic buyers of Iranian oil are not disadvantaged", he added.

Brent crude, the global benchmark, settled down 6 cents to $72.07 a barrel, bouncing off its post-EIA session low on support from earlier reports that Russian Federation and Saudi Arabia are discussing whether to cut crude output next year.

Production has not just risen in the United States, but also in many other countries, including Russia, Saudi Arabia, Iraq and Brazil, stoking producer concerns of a return of oversupply that depressed oil prices between 2014 and 2017. Domestic production surged to a record 11.6 million barrels a day, while stockpiles at the key storage hub in Cushing, Oklahoma, climbed by 2.42 million barrels.

China National Petroleum Corp (CNPC) said on Friday it was continuing to take oil from Iranian oilfields in which it has ownership stakes.

That is likely to play out in the form of weaker demand for oil. "Opec and Russian Federation may use cuts to support US$70 per barrel", said Ole Hansen, head of commodity strategy at Saxo Bank.

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