Oil prices drop as rising supplies meets global economic gloom

Crude Oil

If that wasn't enough to convince skeptics that producing nations are more than capable of holding their own against Iranian losses, Trump on Friday sent shock waves through the analytical community that prefers to rely on geopolitics rather than numbers to assess the state of the crude market, by agreeing to let eight countries - including Japan, India, and South Korea - keep buying Iranian oil after the US reimposes sanctions on the Islamic republic next week.

"Thus far, potential waivers appear targeted at India and South Korea, and they require some reductions over current import volumes while still allowing oil to flow", he said.

"The bulls got ahead of themselves, but not for a bad reason - spare capacity is indeed very low relative to demand growth at a time when we have big suppliers that are necessarily going to be exporting less for the foreseeable future", Essner said, referring to Iran and Venezuela. WTI gained 0.39 USA dollar to settle at 66.82 dollars a barrel, while Brent further decreased 0.27 dollar to 76.17 dollars per barrel.

USA production hit an all-time high of 11.3 Mmbpd in August, according to the Energy Information Administration's first reading of monthly data released Thursday.

At the same time, gasoline held in storage fell by 3.2 million barrels and distillate fuel inventories - including diesel and heating fuel - dropped by 4.1 million barrels.

The nation's crude oil inventories have increased six consecutive weeks, EIA reported.

Last week, hedge funds and money managers cut their bets that oil prices would keep rising to the lowest level in more than a year, according to Reuters market analyst John Kemp.

EIA forecast that USA crude oil production to increase by 1 million barrels per day in 2019.

According to API data, the six-week running tally of crude oil inventory gains equals 27 million barrels.




The market is also impacted by the U.S.

Could oil prices reverse this drop?

Oil has been caught in the global financial market slump this month, with equities under pressure from the trade war between the world's two largest economies, the United States and China.

Russian production has risen to record high of 11.41 million bpd in October, up from 11.36 million bpd in September. US WTI crude, meanwhile, was 0.49% at $63.38 per barrel.

On November 4, 2018, USA sanctions on Iran will begin and Washington has made it clear it expects for Iranian oil customers to stop buying. Oil has become a risk-off trade and is being negatively impacted by the same factors hurting stocks, including worries of a global economic slowdown, the Federal Reserve tightening its policies, trade concerns and rising dollars.

All this is happening a few days before Iran is expected to cease oil exports.

In addition, global oil supply is also rising as Russia, Saudi Arabia and the US pumped 33 million barrels per day in September.

The third week saw steeper fall in crude oil price as news of Saudi journalist hit market which caused tensions to spark between US & Saudi Arabia with US President Donald Trump commenting that US government will impose sanctions if proof was found regarding involvement of Saudi Arabia in the murder of Saudi Journalist. Then as now, traders were trying to determine OPEC and Russia's ability to steer the oil market through a challenging period.

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