Oil prices dip on rising supply, trade tensions

Virginia Carson
November 2, 2018

USA light crude was 60 cents lower at $66.44.

Front-month Brent crude oil futures were at $77.05 a barrel at 0428 GMT, down 29 cents, or 0.4 percent, from their last close.

In the previous week ending October 19, WTI and Brent lost 3.7 percent and 1.2 percent, respectively, and WTI and Brent settled at 69.12 US dollars and 79.78 dollars per barrel, respectively, at the end of the week.

Additionally, hedge fund managers have reportedly cut their bullish positions in crude futures and options for four weeks in a row to their lowest since July 2017, due to an uncertain demand outlook and other factors: in an editorial for Reuters, John Kemp, founding partner at Again Capital, wrote that "Rising oil production from Saudi Arabia, the United Arab Emirates, Kuwait, and Russian Federation has eased concerns about the availability of supplies once USA sanctions on Iran are re-imposed in November".

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

In other related news on Monday, the U.S. Energy Information Administration's latest analysis of planned refinery outages for the fourth quarter of 2018 finds that planned outages in the United States are not likely to cause a shortfall in the supply of petroleum products-including gasoline, jet fuel and distillate fuel relative to expected demand, either nationally or within any U.S. region. The U.S.is said to prepare another round of tariffs on all remaining Chinese imports if talks between the presidents of the two countries fail to ease trade friction.

The Iranian first vice president further described Trump's decision to restore Iran sanctions as illegal, stressing that the move was against the diplomatic success that had culminated in the 2015 Iran nuclear deal or the Joint Comprehensive Plan of Action (JCPOA) - as is technically known. He did not elaborate.

Iran first began to enter into transactions for the sale of oil on the Tehran oil Bourse, which is part of a strategy to counter the US sanctions that will enter into force on 4 November.

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The International Energy Agency (IEA) on Tuesday said high oil prices were hurting consumers and could dent fuel demand at a time of slowing global economic activity.

"The sanctions, more than harming us, would be hurtful to the United States; Trump policies have raised the global oil prices which would not be to our loss, and we have been able to find new customers for our oil", Gholamali Jafarzadeh, a member of Iranian parliament, told the Iranian oil ministry's news service Shana on Sunday. One is led by National Security Adviser John Bolton, who wants the toughest possible approach, and another by State Department officials keen to balance sanctions against preventing an oil price spike that could damage the U.S. and its allies. The Baker Hughes report on Friday said USA energy firms added oil rigs for a third week in a row, keeping the rig count at its highest in over three years.

Crude oil futures fell Monday as investors reduced exposure, extending weakness that started a week ago amid increased investor caution in anticipation of a possible economic slowdown, an increase in oil production and a stronger dollar that could make oil more expensive in other currencies. Stockpiles were expected to have risen about 4.1 million barrels in the week ended October 26, an extended Reuters poll showed on Tuesday.

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