Published: Thu, September 13, 2018
Economy | By

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

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

Traders said this pulled wide open the discount of U.S. WTI crude versus Brent to around $10 per barrel, the biggest since June.

The upturn in oil prices come as the United States' sanctions squeezed Iranian crude exports and after the U.S. crude oil production in 2019 was forecast to grow at a slower rate than previously expected, prompting supply concerns.

Outside the United States, traders have been focusing on the impact of USA sanctions against Iran that will target oil exports from November.

In New York last night Brent crude, the global benchmark, was trading nearly 1 per cent higher at $79.75 a barrel, a rise of 3 per cent since the start of the month. This comes amid the Iranian oil sanctions which are set to be imposed on November 4th, while the USA have also demanded nations to drop Iranian imports to zero.

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.

South Korea has chose to comply with USA demands to cut oil imports from Iran to zero, becoming the first to do so out of the top three buyers.

US crude oil production fell by 100,000 bpd to 10.9 million bpd as the industry faces pipeline capacity constraints.

S&P global Platts said OPEC, in a report, indicated demand for the organization's own crude oil in September will be nearly 1 million bpd more than the level produced in August.

"The path of least resistance for oil prices, given the supply fundamentals, remains up", Harry Tchilinguirian, oil strategist at BNP Paribas, told Reuters Global Oil Forum.

US Energy Secretary, Rick Perry, met Saudi Energy Minister, Khalid al-Falih, on Monday in Washington, as the Trump administration encourages big oil-producing countries to keep output high.

"Crude oil output increased mostly in Libya, Iraq, Nigeria and Saudi Arabia, while production declined in Iran, Venezuela and Algeria", the 15-member oil cartel said. Perry will meet with Russian Energy Minister Alexander Novak on Thursday in Moscow.

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 of daily crude consumption.

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

US crude inventories fell by 5.3 million barrels in the last week, the US Energy Information Administration said on Wednesday.

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