Oil prices fell today as surging output by the world's three largest producers outweighed supply concerns from the start of U.S. sanctions next week against Iran's petroleum exports.
Brent crude futures were at $72.60 per barrel at 0441 GMT, down 29 cents (0.4%) from their last close. WTI crude futures were down 24 cents (0.4%) at $63.45 a barrel.
Brent has fallen by over 12% since the beginning of October, while WTI has lost more than 13% in value, Reuters reported.
OPEC boosted oil production in October to 33.31 million barrels per day (bpd), up 390,000 bpd from September and the highest by OPEC since December 2016.
In the U.S., crude production has established itself well over 11 million bpd. Russian production has risen to record high of 11.41 million bpd in October, up from 11.36 million bpd in September.
With Saudi Arabia pumping 10.65 million bpd in October, combined output from the top-three oil producers is at a record 33.41 million bpd, meaning that Russia, the United States and Saudi Arabia meet more than a third of the world's almost 100 million bpd of consumption.
Despite surging output, concerns lingered ahead of the start of U.S. sanctions against Iran's petroleum exports from next week.
Deputy director of energy policy of the Institute of Energy and Finances, Alexey Belogoriev, speaking to Vestnik Kavkaza, noted that the current actions of oil market players are proactive. "The problems associated with sanctions against Iran were laid in the oil price in August-September. The fact that prices were increasing in September-October was due to the decision of OPEC+ not to respond to the expected decline in Iranian oil. In turn, the fact that oil is getting cheaper is due to the statement of Saudi Arabia about its intention to unilaterally increase the volume of output in order to compensate for the decline in the Iranian export," he said.
"In addition, the dollar is strengthening, which contributes to the fact that prices in dollars are declining. In my opinion, the current volatility is not fundamental. In the next month there will be a lot of uncertainties, and therefore prices will be very volatile. This will be the case until the effect of the thing with Iran ends completely. Most likely, conditional stabilization may take place not earlier than March-April," Alexey Belogoriev predicts.
A senior analyst of 'Uralsib', Alexei Kokin, agreed with the fact that the market is playing out the previous high expectations. “The main thing here is that the market is aware that the real drop in oil supply will be less than traders laid in futures a few weeks ago. Data on current production of OPEC countries, primarily Saudi Arabia, the United Arab Emirates and Libya, show that in fact, output is growing significantly, despite a drop in Iran and Venezuela. Literally in one month, OPEC’s cumulative production increased by 400 thousand barrels per day," he pointed out.
“And the fact that oil has become so cheap is the market’s response to the approaching sanctions, and such a readiness was even a surprise. Nothing catastrophic happens, the market simply evaluates the result of sanctions in a new way,” Kokin concluded.
