US Oil Prices Slide Into Bear Market Amid Production Boom, Iran Sanction Waivers

Global oil prices slumped to an eight-month low Friday, pulling both Brent and West Texas Crude futures into bear market territory, as investors re-calibrate assumptions for worldwide demand amid a surge in U.S. production and a softer stance on Iran sanctions from the White House.

U.S. oil prices have fallen more than 20% since touching a four-year peak in early October as domestic production rates surged ahead of planned sanctions on the sale of Iranian crude, which kicked-in earlier this week. American producers are now pumping a record 11.6 million barrels per day, according to the Energy Information Administration, and crude stockpiles have risen to the highest levels in seven months ahead of a weekend meeting of junior ministers of the OPEC cartel in Abu Dhabi.

The State Department's decision to offer waivers to several countries, including China, the world's biggest energy consumer, allowing them to buy Iranian crude for at least the next six months has also weighed on prices this week, even following data from Beijing that showed October imports rose to a record 9.61 million barrels per day last month.

"The tide has well and truly turned for Brent and WTI over the last month, something I'm sure oil ministers from around the world will be all-too aware of," said Craig Erlam of Oanda. "It's surprising then that heading into the (junior ministers' meeting) this weekend, traders remain resolutely bearish on crude, despite the potential for further output cuts to be discussed in order to address the recent supply demand dynamics and, of course, price."

Brent crude contracts for January delivery, the global benchmark, were marked 32 cents lower at $70.25 a barrel after dipping below $70 for the first time since April earlier in the session.

WTI contracts for December, which are more tightly liked to U.S. gas prices, were marked 28 cents lower at $60.39 a barrel after hitting $59.67 per barrel, the lowest since March 8 and some 22% from the Oct. 4 peak of $76.41, in early Friday trading. 

Global demand is also starting to concern investors who have ridden the recent wave of oil market gains, with a slowdown in China clipping estimates for 2019 imports now that the economy slowed to a growth rate of 6.5% over the third quarter and fresh tariffs on $250 billion worth of China-made goods are set to slow exports to the United States over the coming months.

Last month, the International Energy Agency trimmed its forecast for 2019 demand growth to 1.36 million barrels per day, citing a "weaker economic outlook, trade concerns, higher oil prices" and said big production boosts from OPEC lead Saudi Arabia meant that the global market is "adequately supplied for now."

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