Yahoo Finance Oil Price Fundamental Daily Forecast – Easing of Restrictions Against Exports from Iran Key Issue Driving Price Action
U.S. West Texas Intermediate and international benchmark Brent crude oil futures are trading lower on Tuesday, while attempting to bounce back from their second steep plunge in a week, after additional oil workers went on strike in Norway.
At 0921 GMT, September WTI crude oil is trading $67.11, up $0.04 or +0.04% and September Brent crude oil is at $71.69, down $0.16 or -0.22%.
Earlier in the session, both futures contracts, led by Brent, which rose from a three-month low, traded higher after more oil workers went on strike in Norway, supporting a market that has been under pressure due to oversupply concerns in the past week. As it turned out, the early move appears to have been fueled by weak speculative buyers with prices moving to the negative side of the dial just a short while ago.
The weak response to the news suggests that the strike has had a limited impact on Norway’s oil production so far, but some drillers warned of possible contract cancellations if the dispute goes on for a month or more. What this essentially means is that traders are watching the developments in Norway, but are not likely to respond in a big way until there is a major impact on supply.
Also slowing down the selling pressure early Tuesday are renewed concerns over Libyan supply. According to analysts at ANZ, “The threat of further supply disruptions hasn’t totally evaporated.”
ANZ also warned that “production from Libya remains susceptible to further declines, despite its ports reopening”.
ANZ is basing their warning on reports of a kidnapping of two National Oil Corporation workers at the Sharara oilfield over the week-end. This is expected to cause a drop in production of about 160,000 barrels per day.
In other news, U.S. oil output from seven major shale formations is expected to rise by 143,000 bpd to a record 7.47 million bpd in August, the U.S. Energy Information Administration said in a monthly report on Monday.
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Forecast
Oil Price Fundamental Daily Forecast – Easing of Restrictions Against Exports from Iran Key Issue Driving Price Action
Based on the early price action, it looks as if over the near-term, crude oil prices remain vulnerable because of the uncertainty over how supply will be affected by the easing of restrictions on Iranian oil. However, periodic reports of supply outages in Norway and Libyan may be enough to slow down the selling pressure and could even trigger a few short-covering rallies.
For weeks, speculators had been buying crude oil due to concerns over the aggressive U.S. policy to remove Iranian barrels from the market. This has helped raise prices. Based on Mnuchin’s comments, it looks as if these long buyers are being encouraged to take profits and reduce their long positions. Without knowing exactly how much oil will be allowed to flow from Iran, the market remains vulnerable to volatile price swings.
This article was originally posted on FX Empire
