Oil benchmarks suffered their worst week in more than a month as the market considered the consequences of a potential nuclear deal that could lift US sanctions against Iranian crude.
West Texas Intermediate (WTI) for June delivery on Friday rose 2.65 percent to US$63.58 a barrel, falling 2.74 percent for the week, its worst performance since early last month.
Brent crude for June delivery rose 2.04 percent to US$66.44 a barrel and dropped 3.3 percent — its largest weekly decline since March, amid the possibility that millions of barrels a day of Iranian crude would be returning to the market.
Photo: AP
Iranian President Hassan Rouhani this week said world powers have accepted that major sanctions would be lifted as part of any nuclear deal.
“There’s concern about the additional slug of supply potentially coming from Iran,” Again Capital LLC partner John Kilduff said. “The prospect of more Iranian supply has been a momentum killer.”
Some analysts estimate that Iran could return to pre-sanctions production of almost 4 million barrels a day in as little as three months.
Iranian oil output has been rising this year and was about 2.4 million barrels a day last month, estimates compiled by Bloomberg showed.
The key to whether the potential rise in Iranian output upsets global inventory drawdowns is how early the country re-enters the oil market, Deutsche Bank AG analyst Michael Hsueh said in a note. While the third-quarter deficit stands at only 1.2 million barrels a day, the market is more equipped to handle the additional output the following quarter when that shortfall wold likely be larger, he wrote.
“The most pressing question will be how much an early Iranian ramp-up could hurt third-quarter balances,” Hsueh wrote. “The schedule of the ramp-up will be principally a question of politics and negotiation,” as Iran’s supply “could be brought into the market before an actual increase in production.”
Oil was also caught in a broader sell-off this week in commodities and equities markets following concerns about inflation. Hedge funds cut their net bullish position on WTI and Brent for a second straight week, according to weekly ICE Futures Europe and CFTC futures and options data for four contracts.
The streak of losses this week tested the borders of oil’s present trading range, with the benchmarks finding technical support after dipping to their lowest since last month.
Brent has been trading within a roughly US$5 band over the past month, pulling back from US$70 a barrel, but prompting a round of buying the closer it got to US$65.
Prior to the implementation of sanctions, Iran was producing about 3.8 million barrels a day of crude. Only Iraq and Saudi Arabia’s output exceeds that amount within OPEC.
However, Citigroup Inc estimates that overall global demand is enough to absorb any additional supply, including from Iran and that prices would continue to climb.
EXTRATERRITORIAL REACH: China extended its legal jurisdiction to ban some dual-use goods of Chinese origin from being sold to the US, even by third countries Beijing has set out to extend its domestic laws across international borders with a ban on selling some goods to the US that applies to companies both inside and outside China. The new export control rules are China’s first attempt to replicate the extraterritorial reach of US and European sanctions by covering Chinese products or goods with Chinese parts in them. In an announcement this week, China declared it is banning the sale of dual-use items to the US military and also the export to the US of materials such as gallium and germanium. Companies and people overseas would be subject to
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) founder Morris Chang (張忠謀) yesterday said that Intel Corp would find itself in the same predicament as it did four years ago if its board does not come up with a core business strategy. Chang made the remarks in response to reporters’ questions about the ailing US chipmaker, once an archrival of TSMC, during a news conference in Taipei for the launch of the second volume of his autobiography. Intel unexpectedly announced the immediate retirement of former chief executive officer Pat Gelsinger last week, ending his nearly four-year tenure and ending his attempts to revive the
WORLD DOMINATION: TSMC’s lead over second-placed Samsung has grown as the latter faces increased Chinese competition and the end of clients’ product life cycles Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) retained the No. 1 title in the global pure-play wafer foundry business in the third quarter of this year, seeing its market share growing to 64.9 percent to leave South Korea’s Samsung Electronics Co, the No. 2 supplier, further behind, Taipei-based TrendForce Corp (集邦科技) said in a report. TSMC posted US$23.53 billion in sales in the July-September period, up 13.0 percent from a quarter earlier, which boosted its market share to 64.9 percent, up from 62.3 percent in the second quarter, the report issued on Monday last week showed. TSMC benefited from the debut of flagship
TENSE TIMES: Formosa Plastics sees uncertainty surrounding the incoming Trump administration in the US, geopolitical tensions and China’s faltering economy Formosa Plastics Group (台塑集團), Taiwan’s largest industrial conglomerate, yesterday posted overall revenue of NT$118.61 billion (US$3.66 billion) for last month, marking a 7.2 percent rise from October, but a 2.5 percent fall from one year earlier. The group has mixed views about its business outlook for the current quarter and beyond, as uncertainty builds over the US power transition and geopolitical tensions. Formosa Plastics Corp (台灣塑膠), a vertically integrated supplier of plastic resins and petrochemicals, reported a monthly uptick of 15.3 percent in its revenue to NT$18.15 billion, as Typhoon Kong-rey postponed partial shipments slated for October and last month, it said. The
RSS