Oil falls on oversupply worries despite Iran sanctions

Crude oil Brent

The contract is on course for a weekly loss of more than 4 percent and is down more than $10 in three weeks.

Brent for December settlement was 53 cents lower at $76.36 a barrel on the London-based ICE Futures Europe exchange. In recent weeks, the oil market has carefully watched growing strains in the U.S. -Saudi relationship over the killing of Saudi journalist Jamal Khashoggi.

In equity markets, the S&P 500 Index is set for the worst monthly decline since 2011 on concerns over global economic growth and sluggish corporate earnings. The equities rout is highlighting uncertainty over the global economy, there are growing concerns about the strength of oil demand and crude inventories in the USA are rising.

USA crude CLc1 was down 56 cents, or 0.8 percent, at $66.77 a barrel. "If we're not careful, we could have a repeat of 2008 when oil prices started at $90 a barrel, went up to $140 and ended around $30", he said. Cutting off Iranian supplies is expected to pose new threats and more volatility to the global oil market.

Foreign buyers will be able to purchase Iranian crude at the global exchange after receiving special trade codes, the IRNA news agency reported on Friday, citing Kardor, who is also the CEO of the National Iranian Oil Company (NIOC).

West Texas Intermediate settled up 51 cents to $67.33, while Brent rose 77 cents to $76.94 - the latter number nearly $10 less than the high it achieved on October 3.

Fuel oil supply from Iran is expected to decline to below 1 million mt in October from the usual 1.2 million-1.4 million mt a month, ahead of the United States sanctions in November, market sources said this week.

The global equities slide is seeing oil helped along the bearish path as investors flee riskier assets across the board. The world's second largest economy also halted purchases of U.S. crude in August for the first time since September 2016, according to U.S. Census Bureau data, as the trade spat between the nations escalated.

New concerns about an oversupplied market were raised on Thursday when Saudi Arabia's OPEC governor said that the oil market could face oversupply in the current quarter.

Meanwhile, U.S. production is soaring, boosted by technological advances that have enabled drillers to tap shale formations, with output this year forecast to overtake the previous annual record in 1970. "That's just a couple weeks away", said Phil Flynn, an oil market analyst at Price Futures Group in Chicago.

One of the key hotspots of the trade dispute is likely to be Iran - a country with very close ties to China and one of the main Chinese suppliers of crude. Just recently, Chinaʹs top refiner Sinopec halved its oil imports from Iran as of September, seen by some as bowing to pressure from the United States, which is now seeking to reduce Iranian oil exports down to zero.

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