Summary:
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Oil comes back under pressure to retest recent lows
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Oil.WTI dips to 1-month low at $68.50
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Saudi Arabia plans to raise output
Last week saw some pretty heavy declines for the crude market with both Oil and Oil.WTI hit with some selling. The benchmarks were already trading lower before the US inventory release on Wednesday showed a third consecutive large weekly build and the markets broke below prior support. Friday saw an attempt at a recovery with the price managing to close higher, but they have come back under pressure at the start of the week with Oil.WTI taking out last week’s low in the past hour. The new low of 68.48 is the lowest level in over a month and threatens to mark the start of another leg lower.
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Oil.WTI has continued lower today, with price falling to a 1-month low of 68.48. Price remains under pressure due to the latest geopolitical situation and the recent build in US inventories. Source: xStation
The large build in inventories may have been the immediate catalyst for the recent declines, but if truth be told the bigger reason is likely geopolitical. The price of oil surged higher last month on fears that the forthcoming US sanctions on Iran would create a supply shock, with some analysts and traders even calling for $100 a barrel once more in the not too distant future. However, it now appears that the sanctions may not have as big an impact on supply as previously thought and that talk of 1.5M bpd coming offline was overly pessimistic. With the sanctions due to be implemented from the 4th November it is less than 2 weeks and as such any suggestions for a larger or smaller supply disruption could cause sharp moves in price.
Saudi Arabia has long been seen as the de facto leader of OPEC, and as such it is not surprising to hear the kingdom announce their intent to cover any shortfall in Iranian crude. Due to the death of prominent Saudi critic Jamal Khashoggi there has been some further concerns of a supply disruption from Saudi Arabia. Pressure is growing in the western world for leaders ot halt their arms trade with the kingdom and apply sanctions, possibly on oil, to punish them for what is quite clearly another serious human rights abuse. However, the energy minister, Khalid al-Falih told Russia’s TASS news agency that his country has no intention of unleashing a 1973-style oil embargo on Western consumers, and that rather it is focused on raising output to compensate for losses elsewhere - such as Iran.
Oil.WTI is consolidating after recent declines but appears to be trending lower according to the EMAs. Source: xStation
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