Crude Oil Price Analysis: Hedge Funds Bullish Again as Sanctions Loom

Lloyd Doyle
September 14, 2018

As investors grow concerned that Iranian sanctions may leave the market short of crude oil, November Brent crude futures now trade at a premium of $0.47 over the December contract, highest since May.

Since spring, when the Trump Administration said it would impose sanctions on Iran, traders have been focusing on the impact they could have on global supply.

Brent crude futures have made a firm breach of the descending trendline which has curbed price action previous. US light crude was 15 cents higher at $67.69.

Prices extended gains in post-settlement trade after industry data from the American Petroleum Institute showed US crude inventories slumped 8.6 million barrels last week, versus analysts' forecasts of a 805,000-barrel decrease.

But keen not to see oil prices spike, US Energy Secretary Rick Perry met with Saudi Energy Minister Khalid al-Falih on Monday in Washington, as the Trump administration encourages big oil-producing countries to keep output high ahead of the renewed sanctions.

Russian energy minister Alexander Novak on Wednesday warned of the impact of United States sanctions against Iran.

Russia, the United States and Saudi Arabia are the world's three biggest oil producers by far, meeting around a third of the world's nearly 100 million barrels per day (bpd) of daily crude consumption.

"Markets ... are expecting substantial price pressure as Iran sanction loom", said Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA in Singapore.


Russian energy minister Alexander Novak on Wednesday warned of the impact of USA sanctions against Iran.

"Things are tightening up", the agency that advises Western governments on energy policy said in its monthly report. Novak did not provide details.

World oil consumption will top 100 million barrels per day (bpd) in the next three months, putting upward pressure on prices, although emerging market crises and trade disputes could dent this demand, the International Energy Agency said on Thursday.

Short-term, the outlook is for tighter supply.

The Wall Street Journal said OPEC's total oil production climbed last month, in a sign the oil cartel is sticking with a decision to begin pumping out more barrels of crude this summer after more than a year of holding back output.

A six-country monitoring committee overseeing the OPEC/non-OPEC supply accord will meet September 23 in Algiers to assess market fundamentals and potentially make output policy recommendations.

US oil producers are seeking new buyers for crude they used to sell to China before orders slowed because of the trade disputes between Washington and Beijing.

Other reports by Iphone Fresh

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