Published: Sat, November 17, 2018
Finance | By Loren Pratt

Crude Pops as U.S. Sanctions on Saudis Outweigh Stockpile Build

Crude Pops as U.S. Sanctions on Saudis Outweigh Stockpile Build

Oil prices have now fallen for 12 consecutive trading sessions.

"The combination of the weak stock market and the Donald Trump tweet had oil give up its gains", Flynn said.

"If the ban on Iranian crude persists, obviously, it is a blessing to oil producing countries, especially Nigeria, which relies on crude oil exports for more than 70 per cent of its foreign exchange earnings".

In addition to Trump's tweet, the price of oil has come under pressure because of fears that weakening economies outside of the US could diminish demand.

A joint effort between OPEC and Russian Federation to withhold supply from 2017 was a major contributor to crude price rises previous year and in the first half of 2018.

Brent Crude is not down more than 20 percent from its recent high, officially putting it in bear market territory. The contract gained 65 cents to $66.12 on Wednesday. At Alibra we have noted month-on month increases in the crude sector since September with period rates continuing their upward trajectory this month. The American Petroleum Institute said late on Wednesday that crude inventories rose by 8.8 million barrels in the week to November 9 to 440.7 million, compared with analyst expectations for an increase of 3.2 million barrels. The talks are preliminary, and the size of the final cut will largely depend on the starting point they use, said one of the people. Depending on the final baseline, the reduction could be in the range of 1 million to 1.5 million barrels a day, one of the delegates said. Saudi Arabia said on Monday producers need to cut 1 million barrels a day from October levels. In July, Trump called the organization a "monopoly", warning on Twitter that "gas prices are up & they are doing little to help".

In the U.S., if the stockpile gain reported by the American Petroleum Institute is confirmed by Energy Information Administration data, that will mark the eighth straight week of increases. Analysts in a Reuters poll had expected an increase of 3.2 million barrels.

Oil clung to its rebound as tension over USA sanctions against Saudi Arabia overshadowed a jump in American crude stockpiles. As prices recovered through the summer, USA oil output topped 11 million bpd - contributing one million bpd to a 1.8-million-bpd increase in global output since May, according to the IEA. The IEA estimates total USA oil supply will rise by 2.1 million bpd this year and another 1.3 million bpd in 2019, from a current record of more than 11 million bpd.

Once the oil industry's star product, gasoline is now losing oil refineries money in Europe and has plunged in value against diesel, its main competitor.

Anxious by a drop in oil prices due to record supply from Saudi Arabia, Russia and the United States, the Organization of the Petroleum Exporting Countries is talking of a U-turn just months after increasing production.

Follow Fin24 on Twitter and Facebook.

Like this: