Oil Prices Up as Market Expects Iran Export to Slow
Oil prices saw a weekly gain due to U.S election win would impact Iran supply, while the market anticipates ceasefire discussion could start making headway on Donald Trump wins.
Iranian oil exports dipped in October as Tehran loaded fewer cargoes waiting for the Israeli retaliatory attack for Iran’s missile strike, and they are expected to further slide next year when Donald Trump returns to the White House.
Analysts believe that Trump’s election victory could snap the recent rises in Iranian oil sales as the president-elect is expected to ratchet up sanctions pressure on Iran and its oil industry.
The International benchmark Brent crude traded at $74.66 per barrel on Friday versus $72.84 a barrel last week. U.S West Texas Intermediate (WTI) traded at $71.07 a barrel, up from $69.10 per barrel in the previous week.
Oil prices rose steadily following a decision by OPEC+ countries to extend production cuts and delay output increases by another month.
The OPEC+ group which include the Organization of the Petroleum Exporting Countries (OPEC) and other major producers, announced on Nov. 3 a decision to continue production cuts of 2.2 million barrels per day through December.
The group was expected to increase production by 180,000 barrels daily from December. The reduction in oil supply by major producers supported upward price movement.
Oil prices faced pressure previous as the US dollar surged with the clarity of the election results. However, the oil market managed to recover a significant portion of these losses as the trading session progressed.
The impact of a Trump presidency is still uncertain with several opposing forces potentially at play, ING commodities strategists said in a note, added that USD strength is likely to provide headwinds not just to oil but to the broader commodities complex, as we witnessed yesterday.
Analysts said a Trump administration could see an increase in oil and gas leasing on federal land, which had fallen significantly under Biden. However, US supply growth is going to remain largely price-dependent.
On the flip side, a Trump presidency also opens the door for a more hawkish US stance against Iran, which could mean stricter enforcement of oil sanctions, ING said, noting that Stricter enforcement of sanctions potentially leaves a little more than 1m b/d of oil supply at risk.
Hurricane Rafael in the US Gulf of Mexico continues to put oil and gas supply at risk. According to the Bureau of Safety and Environmental Enforcement (BSEE), a little over 304,000 b/d of US Gulf of Mexico oil production has been shut in due to the hurricane, while 131 mcf/day of natural gas production has also been shut.
The EIA released its weekly inventory report showed that US commercial crude oil inventories increased by 2.15 million barrels over the last week, slightly less than the 3.1 million barrel build reported by the American Petroleum Institute (API) the previous day.
Chinese trade data for October shows that crude oil imports into China remain under pressure with 10.56 million barrels per day of crude imported last month, down 4.9% month on month and 8.7% lower year on year.
This leaves cumulative imports so far this year down 3.4% year on year. Analysts said these numbers will do little to ease Chinese demand concerns.
US Fed made its interest rate decision on Thursday, a day after the election results. The bank reduced interest rates by 25 basis points to the range of between 4.5% and 4.75%, in line with expectations.
Fed Chair Jerome Powell said at a news conference after the decision that the US elections would have no effects on the Fed’s policy decisions in the near term.
The move marks the central bank’s second rate cut in four years. In September, Fed lowered rates by 50 basis points, exceeding expectations. #Oil Prices Up as Market Expects Iran Export to Slow Oil Rises on Middle East Tensions, OPEC+ Output Decision
