Oil resumes drop as Iran loads Europe cargo, China imports fall

[HONG KONG] Oil resumed its decline below US$30 a barrel as Iran loaded its first cargo to Europe since international sanctions ended and Chinese crude imports dropped from a record.

West Texas Intermediate futures fell 0.5 per cent in New York after surging 12 per cent on Friday, while Brent in London slid 0.5 per cent. A tanker for France's Total SA was being loaded Sunday at Kharg Island while vessels chartered for Chinese and Spanish companies were due to arrive later the same day, an Iranian oil ministry official said.

Chinese imports in January decreased almost 20 per cent from the previous month, according to government data.

"Iran is going to add headwinds to the market," David Lennox, an analyst at Fat Prophets in Sydney, said by phone.

"We still have 500 million barrels of US inventories and shale producers are still pumping. Until there are significant cuts to output, the rally is not sustainable."

Oil in New York is down 21 per cent this year amid the outlook for increased Iranian exports and BP Plc predicts the market will remain "tough and choppy" in the first half as it contends with a surplus of 1 million barrels a day.

Speculators' long positions in WTI through Feb 9 rose to the highest since June, according to data from the US Commodity Futures Trading Commission.

WTI for March delivery slid as much as 49 US cents to US$28.95 a barrel on the New York Mercantile Exchange and was at US$29.28 at 1:40 pm Hong Kong time.

The contract gained US$3.23 to close at US$29.44 on Friday after dropping 19 per cent the previous six sessions. Total volume traded was about 2 per cent above the 100-day average. WTI prices lost 4.7 per cent last week.

Iranian Shipments

Brent for April settlement declined as much as 69 US cents, or 2.1 per cent, to US$32.67 a barrel on the London-based ICE Futures Europe exchange. The contract climbed US$3.30 to close at US$33.36 on Friday. The European benchmark crude was at a premium of US$1.53 to WTI for April.

Iran, which was the second-biggest producer in the Organization of Petroleum Exporting Countries (Opec) before sanctions were intensified in 2012, is seeking to boost output by 1 million barrels a day and regain market share after penalties were lifted.

Spanish refiner Compania Espanola de Petroleos and Russia's Lukoil PJSC all booked cargoes to sail from Kharg Island to European ports, according to shipping reports compiled by Bloomberg earlier this month.

In the US, drillers idled rigs for an eighth week to the lowest level since January 2010, according to data from Baker Hughes Inc. The number of active rigs dropped by 28 to 439, the company said on its website Friday.

Speculators' long position in WTI rose by 1,152 contracts to 302,384 futures and options, according to CFTC data. Shorts, or bets that prices will decline, slipped 2.1 per cent. Net-longs increased 5 per cent to a three-month high.

China's crude imports declined to the lowest in three months as state refiners slowed operations amid swelling stockpiles of fuel.

The world's largest energy consumer in January cut imports by 4.6 per cent from a year ago to 26.69 million metric tons, or about 6.3 million barrels a day, according to preliminary data released Monday from the General Administration of Customs in Beijing. Imports reached a record 33.2 million tons in December.

BLOOMBERG