Oil futures dipped in a late-session selloff to settle mixed on Monday as the market continued to digest the impact of US sanctions on Iran while also eyeing a potential stock build last week.
ICE January Brent settled up 34 cents at $73.17/b and NYMEX December WTI was down 4 cents at $63.10/b at market close.
"The market mood is negative," Price Futures Group senior market analyst Phil Flynn said. "We had a bit of a mood-based selloff this afternoon." Earlier in the session, Brent had been trading higher at $74.13/b and WTI was up to $64.14/b.
"The sanctions waivers seem to have not installed a lot of confidence that there is going to be tightness in market," Flynn said. "Even though the reason the Trump administration gave for doing this is to prevent a price spike."
On Monday, US Secretary of State Mike Pompeo said that eight of Iran's top crude buyers -- China, India, Turkey, Japan, South Korea, Italy, Greece and Taiwan -- would receive waivers from US sanctions to continue imports. Notably, major Iranian oil importer UAE did not receive relief from the sanctions (see story, 0200 GMT).
"Because waivers were granted, the market maybe thinks there are more down the road and there will never be a supply squeeze, but I think that's misguided," Flynn said, citing comments from the Trump administration that the waivers will only serve as a temporary stopgap measure.
Backwardation returned to the Brent futures structure on Monday as prompt-month contracts settled 7 cents above second-month levels. Prompt and second-month contracts had closed at parity on Friday. The move into backwardation suggests that the market expects near-term supply to tighten, possibly due to the impact of US sanctions.
US sanctions are expected to cut Iran's exports to 1.1 million b/d in November and December and to 850,000 b/d by the fourth quarter of 2019, compared with a six-month average of 2.4 million b/d earlier this year, according to S&P Global Platts Analytics.
The market also eyed expectations of a continued build in US crude supply last week that further weighed on WTI contracts, analysts said.
US commercial crude supply likely increased 1.9 million barrels to around 427.9 million barrels during the week ended November 2, an S&P Global Platts analysis showed Monday. The expected build would be the seventh consecutive weekly increase in crude supply, taking inventories 1.79% above the five-year average of US Energy Information Administration data for this time of year.
Product futures finished the session mixed. NYMEX December ULSD was up 2.35 cents at $2.1963/gal, but NYMEX December RBOB was down 1.64 cents at $1.6919/gal.
