RIYADH: Oil prices ended last week with the biggest weekly losses of the year. Brent fell below the $70 psychological barrier to $68.69 a barrel, while WTI dropped under $60 to $58.63.
The market remained under pressure from US stock-build for the third week in a row. But what mostly pushed prices lower was the low speculator activity, amid hesitation to add bets on almost flat price fluctuations.
The direction of oil prices has apparently ignored the tight physical market, amid signs that OPEC+ may extend its output cuts extensions, US sanctions against Iran and Venezuela, and slower Russian exports due to a contamination of some of its crude.
While Iran said it has already resumed oil sales to China, its biggest buyer, tanker tracker data suggests its total exports have plummeted. Iranian exports fell to 500,000 barrels per day or lower in May, more than half the level seen in April, the data suggest. However, Iran needs to keep oil flowing as any suspension would damage its future operations at its aging oil fields.
To keep its operations going as exports slump and sanctions block purchases, Iran has been forced to store more oil on land and at sea.
But that brings myriad problems. Iran’s land storage is very limited due to poor oil infrastructure and logistics that haven’t been developed since the mid-1970s. At sea, it has an aging fleet of ships, and it will face difficulties with insurance and in striking agreements with shipping companies.