Weekly exchange data shows money managers hold a combined net long position equivalent to around 364 million barrels of USA and Brent crude futures and options, down from over 800 million barrels two months ago.
Brent crude was down 70 cents a barrel at $66.06 at 11:37 a.m. EST (1637 GMT), having recovered from a session low at $65.27. The exemptions allow these parties to buy a reduced volume of Iranian crude for the 6-month period, but volumes and details on the waivers remain a bilateral secret, Kallanish Energy notes.
Fiona Cincotta, senior market analyst at City Index, said yesterday: 'Fears of slowing global growth are fuelling concerns over global demand, just at a time when Saudi Arabia, Russia and the USA continue to ramp up production'.
Oil tumbled below $54/bbl for the first time in a year amid concern OPEC's plans to cut production won't be enough to stem a surge in stockpiles and a selloff in global equities.
Oil prices plummeted on Tuesday, as U.S. President Donald Trump reaffirmed Saudi Arabia as "a great ally" and signaled it won't punish Saudi crown prince over journalist Jamal Khashoggi's killing.
Meanwhile, production is at or close to record highs in the US, Russia and Saudi Arabia. "It really is a too-big-to-fail relationship", said Joe McMonigle, senior energy policy analyst at Hedgeye Risk Management in Washington.
The International Energy Agency (IEA) warned Opec and other producers of the "negative implications" of supply cuts, with many analysts fearing a spike in crude prices could erode consumption.
"I think today what's driving oil is the continued equity selloff, and oil is really collateral damage".
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The number of long positions in Brent Crude slumped to their lowest in almost three years in the week to November 13, but the long positions in WTI Crude slightly edged up by less than 1 percent, snapping a six-week-long streak of weekly drops in longs.
However, the United States was considering adding Venezuela, one of its biggest crude suppliers, to its list of state sponsors of terrorism but no final decision has been made, a person familiar with the deliberations said late on Monday.
Prices were lifted by a report of an unexpected decline in U.S. commercial crude inventories and record Indian crude imports.
Record crude imports by India of nearly 5 million barrels per day (bpd) also supported prices, traders said.
With output surging and the demand outlook deteriorating, the Organization of the Petroleum Exporting Countries (OPEC) is pushing for a supply cut of between 1 million and 1.4 million bpd to prevent a repeat of the 2014 glut.
Russian Energy Minister Alexander Novak said that Russia, which is not an OPEC member, planned to sign a partnership agreement with the group, and that details would be discussed at OPEC's December 6 meeting in Vienna.
"We are entering an unprecedented period of uncertainty in oil markets", IEA Executive Director Fatih Birol told a conference in Norway on Monday.