🛢️Oil WTI gains 2%

OPEC+ has delayed an increase in oil production. Crude oil prices have gained over 2% at the start of the week, just ahead of the US elections and the Fed's decision. However, the primary driver for oil prices at this moment is the news that OPEC+ decided over the weekend to postpone an increase in production by a month. OPEC+ had previously announced that production was to increase by 180,000 barrels per day each month from October, but this was later postponed to December. Now, the production increase is set to begin in January.

Currently, OPEC+ is under no pressure to increase production, due to uncertainty surrounding demand. Moreover, a significant portion of the countries participating in the production cut agreement are already producing more. In October alone, OPEC+ production increased by 400,000 barrels per day, primarily due to the restoration of production by Libya. The next OPEC+ meeting is scheduled for December 1st.

Iran Threatens Further Attacks

During a weekend speech, Iran's supreme leader threatened Israel and the United States, stating that after the presidential election but before the inauguration of the new president, Iran would decide on a crushing military response to recent actions. Ayatollah Ali Khamenei indicated that the attack would be larger than just one using drones and missiles. This, in turn, is creating further uncertainty regarding the supply situation in the oil market.

Oil in the Face of US Elections

Uncertainty in the oil market is being added to by the US elections and the Fed's decision this week. Recently, we have observed a breakdown in the correlation between yields and crude oil. US bond yields remain high, linked to the risk premium with Trump's recent surge in popularity and reduced expectations for US interest rate cuts. On the other hand, if Harris were to win the election and the Fed were to adopt a dovish stance after the latest weak US data, yields could fall, reducing upward pressure on prices. Recently, many forecasts (including those from Citi and JP Morgan) have indicated that oversupply in the oil market could drive prices down to $60 per barrel next year.

WTI crude has returned above $70 per barrel today, attempting to break above the 25 and 50-day moving averages. If successful, the next significant resistance level is $72-73 per barrel. It's worth noting that speculative positions on oil are once again extremely low, similar to September or earlier in January of this year. Source: xStation5