OIL PRICES & IRAN SANCTIONS
PLATTS - Crude oil futures retreated from three-year highs in mid-morning trade in Europe on Friday, as the market waited to see whether a deadline for US President Donald Trump to waive sanctions against Iran later in the day would provide another bullish jolt to the market.
At 1126 GMT, ICE March Brent crude futures were 22 cents lower than the previous day's settle of $69.26/b, after briefly rising to a more than three-year high of $70/b on Thursday.
The NYMEX February light sweet crude contract was down 47 cents at $63.34/b. The US Dollar Index was 0.52% lower at 91.13.
On Friday, Trump will face a deadline for whether the US will continue to waive sanctions on Iran, as part of the Iranian nuclear deal known as the Joint Comprehensive Plan of Action.
On Thursday, US Secretary of State Rex Tillerson told reporters that Trump would likely announce the decision in the afternoon in Washington.
If that deal unravels, 800,000 b/d of Iranian crude exports would be at risk, according to analysts.
"If Trump were to unilaterally reimpose sanctions, the oil price would probably continue to climb, as this would also jeopardize Iranian oil exports again," Commerzbank analysts said in a note.
However, some of that bullish risk could already be priced in on expectations that Trump -- who has been a frequent critic of Iran and the previous administration's nuclear deal -- will not waive sanctions, said Warren Patterson, a commodities strategist at ING in Amsterdam.
"When Trump failed to certify the Iran nuclear deal [in October 2017], a large amount of that strength was taken into account," Patterson said.
At the time, Trump refused to certify Iran's compliance with the 2015 accord, sending the issue to the US Congress. If he does not waive the sanctions on Friday, the US will largely be seen as abandoning the deal.
Following the implementation of the deal in January 2016, Iran doubled its exports to around 2.2-2.3 million b/d.
Meanwhile, Friday's price consolidation comes at the end of a bullish week for crude, which has been pushed higher largely by sharp crude stock drawdowns in the US, which fell by 4.948 million barrels in the week to January 5, a larger-than-expected drop.
That has been paired with geopolitical tensions in the leadup to the Iran deadline, and signs of further declines in Venezuelan output, which are now at their lowest level in around 15 years.
However, analysts have also warned that the recent rally has shaken off bearish signals, including sharp builds in the gasoline and diesel stocks in the week to January 5, and a warning from the US Energy Information Administration (EIA) that US crude production could surpass a multi-decade production record of 10 million barrels by next month, and could rise past 11 million barrels by November 2018.
"It has obviously been quite the week for oil," said Patterson. "[But] it really does seem like the market is just getting a bit ahead of itself. It is pretty hard to justify $70/b at the moment."
The price gains also set up a potential quandary for OPEC: higher prices mean higher incomes for cash-strapped members, but risk encouraging further production by US shale producers, which may in turn grab a larger slice of global market share.
In other news, the latest Chinese crude import data on Friday indicates that the country imported 33.7 million barrels in December, pushing China past the US to become the world's largest crude importer.
Looking forward, the market will also be watching for the weekly Baker Hughs rig oil count, which is expected later on Friday.
The rig count is used as a proxy for the pace of future crude production in the US.
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IEA - For the third consecutive year, global energy investment declined, to USD 1.8 trillion (United States dollars) in 2017 – a fall of 2% in real terms. The power generation sector accounted for most of this decline, due to fewer additions of coal, hydro and nuclear power capacity, which more than offset increased investment in solar photovoltaics.
EIA - Crude oil production from the major US onshore regions is forecast to increase 143,000 b/d month-over-month in July from 7,327 to 7,470 thousand barrels/day , gas production to increase 1,066 million cubic feet/day from 69,466 to 70,532 million cubic feet/day .
U.S. FRB - Industrial production rose 0.6 percent in June after declining 0.5 percent in May. For the second quarter as a whole, industrial production advanced at an annual rate of 6.0 percent, its third consecutive quarterly increase. Manufacturing output moved up 0.8 percent in June.
U.S. DT - The sum total in May of all net foreign acquisitions of long-term securities, short-term U.S. securities, and banking flows was a net TIC inflow of $69.9 billion. Of this, net foreign private inflows were $58.8 billion, and net foreign official inflows were $11.1 billion.