Oil prices fell almost 4 percent, to their lowest in more than two months, on May 30 as the Energy Information Administration (EIA) said crude stockpiles fell about 300,000 barrels last week.
That was less than the 900,000-barrel decline analysts forecast in a Reuters poll and well below the 5.3 million-barrel drawdown reported by the American Petroleum Institute (API) late on May 29.
“The oil inventories report has added to the bearish sentiment prevailing in today’s trading session,” said Abhishek Kumar, head of analytics at Interfax Energy in London.
Brent crude, the leading oil futures index, fell $2.58, or 3.7 percent, on the news to settle at $66.87 a barrel—the lowest since March 12.
Oil prices are being pushed down by booming U.S. oil production as well as a muted economic outlook for China, which holds the short end of the stick in the tariff escalation with the United States.
Trump imposed sanctions on the Iranian energy sector in November, but gave 180-day waivers to eight importers of Iranian oil, including China and India.
The waivers expired in early May and the administration said no more will be issued and none extended.
But on May 30, Brian Hook, the U.S. special representative for Iran, said the countries will be allowed to import more Iranian oil until they reach a volume cap negotiated in their waivers.
“We will sanction any efforts to import Iranian crude oil beyond the limits that were negotiated in the period that ran from November through May,” he said in a phone briefing.
The negotiated caps weren’t made public. The other countries that received the waivers were Japan, South Korea, Turkey, Italy, Greece, and Taiwan.
Iranian crude exports in May dropped to less than half of April levels at around 400,000 barrels per day after the United States tightened sanctions on Tehran’s main source of income. Iran needs to export at least 1.5 million to 2 million barrels per day of crude to balance its books.
Pressure on Iran
Trump reimposed sanctions on multiple sectors of Iran’s economy in two waves after he quit the Iran nuclear deal in May 2018.
The deal was spearheaded by the Obama administration with the goal of delaying Iran’s ability to develop a nuclear weapon. In return, it lifted economic sanctions on Iran and allowed it to recover up to $150 billion in assets.
Trump has criticized the deal for giving Iran too much while not addressing a plethora of its activities around and beyond the nuclear program, including its ballistic missile program, support for terrorists and militias in the region, and other destabilizing activities.
In April, Trump announced he would designate Iran’s Islamic Revolutionary Guard Corps (IRGC) as a foreign terrorist organization—the first time the United States has marked a branch of a foreign country’s military as such.
Iran says its missile program is only defensive, but has repeatedly threatened to disrupt oil shipments through the Strait of Hormuz if the United States tries to throttle Iranian oil exports. The strait is a major choke point between the Persian Gulf and the Gulf of Oman through which about a fifth of the world’s oil shipments pass.
In November 2018, an IRGC commander threatened that U.S. bases in Afghanistan, the United Arab Emirates, and Qatar, and U.S. aircraft carriers in the Gulf were within range of Iranian missiles.
On May 14, Yemen’s Iran-aligned Houthi rebels launched a coordinated drone attack on a critical oil pipeline in Saudi Arabia, Iran’s biggest rival in the region.
Four tankers—two Saudi, one Emirati, and one Norwegian—were attacked on May 12 near the Strait of Hormuz by unidentified saboteurs. Unidentified U.S. officials told Reuters that Iran encouraged the Houthis or Iraq-based Shi’ite militias to carry out the attacks.
Reuters and The Associated Press contributed to this report.
Update: The article was updated to reflect the impact of the lower-than-expected decline in U.S. oil inventories on oil prices.