UPDATE 11-Oil prices drop as ‘trifecta of trouble’ may cause glut


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    * U.S. crude output tripled since 2008: https://tmsnrt.rs/2D82k38
    * China can still import some Iranian crude
    * U.S. output to top 12 mln bpd by mid-2019 -EIA 

 (Updates with settlement prices, post-settlement trading)
    By Jessica Resnick-Ault
    NEW YORK, Nov 8 (Reuters) - Oil prices fell nearly 2 percent
on Thursday as investors focused on swelling global crude
supply, which is increasing more quickly than many had expected.
    The market focused on record U.S. crude production and
signals from Iraq, Abu Dhabi and Indonesia that output will grow
more quickly than expected in 2019. Fears of the potential
supply glut dampened a rally early in the session driven by
Chinese data that showed record oil imports. 
    “There’s a trifecta of trouble created by U.S. stockpile
builds, OPEC overproduction and the watering down of Iran
sanctions,” said Bob Yawger, director of futures at Mizuho in
New York. 
    Brent crude futures  LCOc1 , the global benchmark, fell
$1.42, or 1.97 percent, to settle at $70.65 a barrel, the lowest
since mid-August. U.S. crude futures  CLc1  fell $1.00, or 1.6
percent, to $60.67 a barrel, the lowest since March 14.
    In post-settlement trade, both contracts extended losses.  
    China's crude imports rose to 9.61 million barrels per day
(bpd) in October, up 32 percent from a year earlier, customs
data showed.
    China will still be allowed to import some Iranian crude
under a waiver to U.S. sanctions that will enable it to purchase
360,000 bpd for 180 days, two sources familiar with the matter
told Reuters on Tuesday.  urn:newsml:reuters.com:*:nB9N1X603M
    U.S. crude output reached a new record high of 11.6 million
bpd in the latest week and the country has now overtaken Russia
as the world's largest oil producer. The move higher in
production was a large jump, “not just a tick,” Yawger said. 
    The U.S. Energy Information Administration said this week it
expects output to top 12 million bpd by the middle of 2019,
thanks to shale oil.  EIA/M 
    Even with U.S. sanctions on Iranian oil in place, investors
believe there is more than enough supply to meet demand.    
Waivers granted to the sanctions intensify the market’s
perception that sanctions may not limit crude supply as much as
initially expected.
    This view is reflected in price charts showing the
front-month January Brent futures contract trading at a discount
to February. This price structure, known as contango,
materializes when market players believe there is a supply glut
and decide to store oil rather than sell it. This creates an
even larger pool of unsold crude.
    Some market watchers believe the Organization of the
Petroleum Exporting Countries and allies including Russia may
take steps to reduce supply.
    "OPEC and Russia may use (production) cuts to support $70
per barrel," said Ole Hansen, head of commodity strategy at Saxo
Bank.  urn:newsml:reuters.com:*:nL8N1XI5V2
    Saudi Arabia's top government-funded think-tank is studying
the possible effects on oil markets of a breakup of OPEC, the
Wall Street Journal reported on Thursday, citing people familiar
with the matter. The research project does not reflect an active
debate inside the government over whether to leave the
Organization of the Petroleum Exporting Countries in the near
term, the Journal reported.  urn:newsml:reuters.com:*:nL4N1XJ5XB

GRAPHIC: U.S. crude oil output hits record 11.6 mln bpd:    https://tmsnrt.rs/2PfIZEH
FACTBOX-The knowns and unknowns of U.S. Iran oil sanction
waivers     urn:newsml:reuters.com:*:nL8N1XI4QQ
COLUMN-Russia and Saudi Arabia's oil-market management challenge
 (Additional reporting by Amanda Cooper in London and Henning
Gloystein in Singapore; editing by David Gregorio and Chizu
 ((Jessica.Resnick-Ault@thomsonreuters.com; 646-223-6052;))

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