Oil moves sharply lower on report EU may be able to "skirt" U.S. sanctions on Iran
Oil futures turned sharply lower on Wednesday, breaking out of earlier rangebound trade, following a report that the European Union may launch a mechanism that would allow companies to bypass U.S. Sanctions and trade with Iran.
The European Union is expected to provide nondollar trade with Iran, circumvent U.S. sanctions, Reuters reported Wednesday, citing comments from diplomats.
The launch of the mechanism would allow the EU to "skirt" U.S. sanctions, but "that can be offset by reports that the Trump administration is counting on energy companies that they should get prepared for sanctions on Venezuela," said Phil Flynn, senior market analyst at Price Futures Group.
The Trump administration "could impose Venezuela oil sanctions as soon as this week if the political situation deteriorates further," Reuters Venezuela tweeted Wednesday citing sources.
West Texas Intermediate crude for March delivery
CLG9, -1.91%
fell to 82 cents, or 1.6%, to $ 52.19 in bar on the New York Mercantile Exchange. March Brent
LCOH9, -1.20%
was down 83 cents, or 1.4%, at $ 60.67 on ICE Futures Europe.
Oil futures had been making only modest moves Wednesday before the reports, finding support after recent data suggested in slowdown in U.S. shale production, but also pressured on ongoing worries about global crude demand.
Prices on Tuesday came under pressure after a warning for 2019 global growth from the International Monetary Fund and weak economic data out of China, which underlined concerns about global economic growth and energy demand.
But support emerged late Tuesday from data just ahead of the settlement. The Energy Information Administration forecasts a rise of 62,000 barrels a day in February for oil output, from a month earlier, to 8,179 million barrels a day. The agency had forecasts of more than double that for January from December.
Oil prices have risen by around 20% since its annual lows in the last week of December. Production cuts by the Organization of the Petroleum Exporting Countries and its allies were largely behind that market move. OPEC and 10 producers outside the oil cartel, led by Russia, agreed late in 2018 to collectively hold back crude output by 1.2 million barrels a day for the first half of 2019 to limit a supply glut and boost prices.
Read: Here's what really worries investors about China's slowdown
The American Petroleum Institute releases weekly data on U.S. oil inventories late Wednesday, followed by official data from the EIA on Thursday. Both a day later than usual because of Monday's Martin Luther King, Jr. holiday.
Analysts polled by S&P Global Platts expect the EIA to report a decline of 600,000 barrels in crude stockpiles for the week ended Jan. 18, along with supply increases of 2.9 million barrels for gasoline and 900,000 barrels for distillates.
On Nymex, February heating oil
HOG9, -0.95%
was down 1.3% at $ 1,876 a gallon, while February gasoline
RBG9, -1.68%
shed 2.2% to $ 1,371 a gallon.
In other energy trading, February natural gas
NGG19, -1.15%
was down 0.8% to $ 3.102 per million British thermal units after trading as high as $ 3,167, continuing to see high volatility on the back of changing weather forecasts. information for the US trading day. Subscribe to MarketWatch's free Need to Know newsletter. Sign up here.
