Oil Prices Fall On Signs Of Rising Global Supply

Virginia Carson
November 3, 2018

Brent for January settlement rose 0.5 percent, or 36 cents, to $73.25 a barrel on the London-based ICE Futures Europe exchange.

Brent crude futures had gained 83 cents, or 1.1 percent, to $76.74 a barrel by 0746 GMT. The price of the West Texas Intermediate (WTI) for December delivery and Brent oil price for December delivery lost 1.58 percent and 2.2 percent, respectively, during the week ending October 26. WTI is now more than $11 below its October 3 high of $76.90.

USA crude oil production reached 11.3 million barrels per day (b/d) in August 2018, according to EIA's latest Petroleum Supply Monthly, up from 10.9 million b/d in July. More so, the ongoing increase in the U.S. stockpiles also added to the rising supply concerns. The first of week of October saw Crude oil trade in range bound fashion with price movement limited between $73 & $76 per barrel as investors worry and concerns over U.S. sanctions on Iranian Crude oil import greatly affected price momentum.

Crude futures traded choppily on Wednesday, with Brent rising by $1 a barrel earlier in the session before retreating.

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"A Saudi pledge to produce as much oil as possible, and the stock market rout, have sharply reduced concerns about the November 4 implementation of U.S. sanctions against Iran", said Ole Hansen, head of commodity strategy at Saxo Bank.

For a sense of perspective, July 2016 was two months before a meeting that paved the way for an historic deal between OPEC, Russia and other producers to cut output.

Schork thinks that the crude oil prices are now at a key level of support.

"The $100 per barrel crude oil forecast was always rather unlikely".

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Previously, Pompeo had said it was "our expectation that the purchases of Iranian crude oil will go to zero from every country or sanctions will be imposed", but also acknowledged that waivers were being negotiated with nations that said crude from the Middle East producer was critical to their energy industry.

With Saudi Arabia pumping out 10.65 million bpd so far in October, combined output from the top three oil producers is now higher than ever, at 33.41 million bpd, meaning that Russian Federation, the United States and Saudi Arabia alone meet more than a third of the world's nearly 100 million bpd of crude oil consumption. That's a post-Soviet record, and not far off the highest-ever production.

Traders said oil received some support from stock markets, which pulled back from 20-month lows on Wednesday amid pledges by China to support its markets.

Also weighing on prices is growing concerns over the prospect of a global slowdown amid the ongoing U.S-China trade war, said Bruce Xue, an analyst with Huatai Great Wall Capital Management.

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