Oil prices drop amid concerns over rising crude output

Marcus Newton
November 3, 2018

The growth in Texas and New Mexico since the start of 2018 surpassed EIA's previous expectations, which assumed that pipeline capacity constraints in the Permian region would dampen production growth in response to the increased differential between the West Texas Intermediate (WTI) crude oil price at Cushing, Oklahoma, and the WTI price at Midland, Texas.

USA sanctions on Iran - set to go into full effect next week - and a bounce in stock markets from recent losses also underpinned crude futures. Bearish rout in key global markets added further bearish pressure to crude oil price in broad market.

With the beginning of November, analytical worries about a market tightening due to the USA sanctions against Iran seem to be nearly forgotten, and putting the matter even further to rest are reports of huge us and Russian Federation output surges - as well as the disclosure that American president Donald Trump has granted eight countries leniency in buying Iranian oil. In a post on Twitter on Thursday, Trump had said he had a "long and very good conversation" with Jinping and that the trade discussions were "moving along nicely".

Yet what really had oil give up the bullish ghosts were the comments by U.S. National Security Adviser John Bolton that several countries may not be able to cut Iranian oil imports to zero right away. Saudi Arabia was pumping at then-record levels, and USA drillers were adding rigs to American oil fields.

US crude inventories rose by 3.22 million barrels for a sixth week, the longest streak of gains since March 2017, the Energy Information Administration reported Wednesday.

The West Texas Intermediate for December delivery dropped 0.55 USA dollar to settle at 63.14 dollars a barrel on the New York Mercantile Exchange, and the Brent crude for December delivery lost 0.08 dollar to 72.83 dollars a barrel on the London ICE Futures Exchange.

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President Donald Trump's threat to sanction foreign firms that buy Iranian barrels beyond his November 4 deadline has wiped roughly a third of Iran's oil exports off the market.

Both benchmarks posted their biggest monthly percentage decline since July 2016 in October, with Brent down 8.8 per cent for the month and USA crude losing almost 11 per cent.

Therefore, the price could continue to drop until the OPEC members meet in December at Vienna. Refinery utilization rates rose by 0.2 percentage points.

Influencing Tuesday's crude price movements were ongoing fears that the trade dispute between the United States and China will get worse, Bloomberg reported earlier.

This concession eased worries of a shortage in supply that might hit markets once United States sanctions on Iran are reimposed on Sunday.

Other reports by MaliBehiribAe

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