Energy Report: Wavering

Oil Prices are wavering as reports surface that the U.S. is still considering waivers to some countries so that they can buy oil from Iran without the fear of retribution from the United States. This comes as global stock markets look shaky as rising yields and concerns around Italy and other emerging markets are sending stocks lower.

This is weighing on the oil price even as the U.S. oil rig count fell by two to 861 suggesting that U.S. oil production will be less than expected. The rig count in the Permian basin fell back by one, 485 rigs, as pipeline and labor constraints limit new oil production potential. Even cuts in Chinese interest rates, that should increase oil demand in China, failed to excite the Chinese stock market as it must play catch up from the selling it missed while the country was on vacation. U.S. volumes may be lower than usual as it is the celebration of Columbus Day which is a banking holiday. Oil traders also have to keep an eye on Tropical Storm Michael that is expected to boomerang back into the Gulf of Mexico.

India’s Oil Minister Dharmendra Pradhan said India would continue to purchase Iranian crude in November, according to Reuters. Also, 2 companies in India have ordered barrels in November, India’s oil minister said on Monday. The Trump administration is considering waivers on sanctions, a U.S. government official said on Friday. India’s oil minister said he does not know whether it would receive a waiver from U.S. sanctions.

The reports were negative for crude because we had heard earlier that India was going to try to reduce their Iranian imports to zero. That still may happen at some point, but for now, the oil market must take this as a negative, because it was assumed that India was really going to go cold turkey off Iranian oil.

A big part of the selling in oil is tied to selling global stocks. MarketWatch reports that Italian government debt was under selling pressure Monday, pushing the yield on 10-year paper to its highest intraday level since May, after European Union officials criticized the government’s fiscal plans, reinforcing expectations for a budget clash with Brussels. Investors are also weighing the prospect of near-term downgrades to Italy’s credit rating. Bloomberg reported that Italy’s Deputy Prime Minister Luigi Di Maio shrugged off European Commission attacks on his government’s fiscal plan and said his anti-austerity view will grow stronger across the continent.