Oil crashes as Trump’s Iran sanctions fail to diminish supply fears

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• Enhanced US sanctions on Iran came into effect on
  Monday, leading to concerns about tighter supply

• But, increased production from major oil nations has
  eased supply issues, driving prices lower
• Sell off in crude futures has seen Brent, the
  international benchmark, fall 20% in less than two months,
  otherwise known as a bear market

Brent crude prices fell to
multi-month lows today as supply fears caused by US sanctions on
Iran waned.

Oil prices dropped below $70 a
barrel for the first time since April, having reached as high as
$86 last month, on the back of trade fears and waning growth.
Brent now sits at $69.68, down 1.8%.

Expectations that US sanctions on
Iran could take substantial crude volumes out of the market have
been mitigated by steadily increasing production out of Saudi
Arabia, Russia, and the US shale industry. Those countries are
now pumping at near record levels with figures suggesting 33
million barrels per day, or a third of the world’s oil, is being
produced by the trio.

“There is no slowing down the
bear train,” said Stephen Brennock, analyst at London brokerage
PVM Oil. “Instead, the energy complex has extended a rout driven
by swelling global supplies and a softening demand
outlook.”

Markets Insider Brent
Crude three month chart
Markets
Insider

The Financial Times on
Friday reported
more crude oil could also be coming from Iraq, with a deal close
between its federal government and the Kurdistan Regional
Government to restart exports from the disputed territory of
Kirkuk.

“In view of the latest price
slump and the oversupply that looks set to materialize next year,
the Organization of the Petroleum Exporting Countries is thinking
about cutting back oil production,” analysts at Commerzbank said
in a note on November 8.  

US crude also dropped into a bear
market on November 8 as prices fell to $59.28. Selling
intensified over the past week following the publication of
figures from the US’s Energy Information Administration which
showed that US oil inventories are at a five-month high.
Temporary waivers on importing Iranian crude were taken by a
number of countries, including some of the OPEC members’ biggest
customers, but these will expire in six months.

All eyes will now be on the OPEC
summit in Abu Dhabi this weekend, where a meeting with non-OPEC
members will determine potential supply cuts.