Oil Market Update (October 17, 2012)

Oil fell on Tuesday due to supply concerns after the European Union introduced more sanctions on Iran. Strong supplies and large stockpiles in the United States also capped any meaningful gains.

The measures came days after Iran announced that it would negotiate on halting higher-grade uranium enrichment if given fuel for a research reactor, according to Fox Business News.

Crude oil for November delivery fell 21 cents to $91.65 a barrel on the New York Mercantile Exchange. The contract touched $89.79, the lowest level since October 9.

Front-month Brent crude was up 72 cents at $115.34 on the London-based ICE Futures Europe exchange.

The spread between grades could potentially narrow further as US Gulf Coast refiners resume operations after maintenance and as North Sea production climbs with the end of work on oil fields, as per remarks by Hussein Allidina, head of commodities research at Morgan Stanley.

Adding to an already abundant supply, Saudi Arabia pumped approximately 9.77 million barrels a day (bpd) of crude oil in September. According to official Saudi government figures, the world’s largest oil exporter produced 9.75 million bpd in August and 9.8 million bpd of crude in July.

“Fundamentally there is no shortage of oil, with Saudi Arabia and others maintaining high output while inventory levels are also good,” said Ken Hasegawa, a commodity sales manager with Newedge in Tokyo.

Brent was supported by a possible delay in the restart of Britain’s largest oil field, Buzzard, after maintenance, further affecting shipments of oil that sets the benchmark.

“Once again, it is apparent that the oil market is currently being driven by speculation and too much ‘hot money,'” states a Commerzbank research note.

Meanwhile, Turkey is increasing its crude purchases from Russia and Saudi Arabia as it seeks to extend an exemption granted by the US for purchases from Iran, Energy Minister Taner Yildiz confirmed. The exemption that allows the country to continue buying Iranian crude amid sanctions expires on December 6.