Iranian crude production fell 200,000 b/d from July to 3.52 million b/d in August as US sanctions loom, and apparent hedging activity indicates some traders are preparing for a potential price spike above $80/b as a result of further declines in Tehran's exports, the Energy Information Administration said Tuesday.
Iran's production has dropped 310,000 b/d since April, EIA said. S&P Global Platts Analytics expects 1.44 million b/d of Iranian crude and condensate to leave the market when the US secondary sanctions snap back November 5, compared with April levels.
EIA said apparent hedging activity in the crude options market suggest some traders have lined up financial protection, anticipating higher prices as the US sanctions remove more Iranian barrels.
"Call options for the December 2018 Brent crude oil futures contract with a strike price of $80/b have been one of the most actively traded out-of-the-money contracts in recent months," EIA said in the Short-Term Energy Outlook.
A call option is "out-of-the-money" when the strike price of the option is higher than the price the futures contract is currently trading.
OPEC crude production increased 230,000 b/d from July to 32.56 million b/d in August, EIA said.
EIA expects OPEC output to average 32.35 million b/d in 2018, steady with last month's outlook, and 32.20 million b/d in 2019, up 110,000 b/d from last month's report.
Top OPEC producer Saudi Arabia trimmed output to 10.42 million b/d in August, from 10.48 million b/d a month earlier, EIA said.
EIA said Venezuelan production sank to 1.26 million b/d, continuing its freefall as a result of the country's economic collapse.
Libyan crude production jumped 290,000 b/d from July to 950,000 b/d in August, EIA said.