Oil prices fell slightly on Wednesday after data from the US Energy Information Administration showed an increase in crude stocks, however, the Trump administration’s looming sanctions on Iranian crude exports continue to unsettle the market. Total photo.
Brent oil prices on track for fifth consecutive quarterly increase
Oil prices slipped on Wednesday after the US Energy Information Administration reported an increase in US crude stockpiles. However, the Trump administration’s looming Iranian crude export sanctions have kept Brent futures over the $80/barrel mark.
By 2:39 p.m., EDT, Brent crude dropped 39 cents to $80.87/barrel, down from loftier heights on Tuesday when the benchmark hit $82.55, the highest since November 2014. US West Texas Intermediate fell 57 cents to $71.71/barrel. The Canadian Crude Index lost $1.45 to $38.31.
According to data from the US EIA, US crude stocks rose by 1.9 million barrels last week. Analysts polled prior to the data release had predicted a drop in inventories of 1.3 million barrels.
The agency also reported that refinery crude runs dropped by 901,000 barrels per day.
“Generally speaking, the EIA inventories were bearish with gasoline inventories rising and a significant increase in gasoline imports,” Andrew Lipow, president of Lipow Oil Associates told Reuters. “However, overall the market remains supported as sanctions on Iranian exports take hold.”
The oil market is bracing for the implementation of the Trump administration’s sanctions on Iranian crude exports which are set to come into force in early November. Brent crude is on track for its fifth quarterly increase. This is the longest stretch since early 2007 when a six-quarter run boosted oil to a record-high $147.50/barrel.
While many are concerned about rising oil prices due to the sanctions, Trump and other US officials are trying to reassure consumers and investors that there will be enough crude to supply the market. Recently, Trump tweeted warnings to OPEC about price increases, which recently were rebuffed by the cartel.
And on Tuesday while speaking at the United Nations, Trump reiterated his demand that OPEC produce more crude and accused Iran of creating chaos. He went on to promise more sanctions against Tehran.
For their part, OPEC and OPEC+ remain steadfast in their position that they will not increase their production beyond the limits of the cartel’s supply cut agreement which came into play in January of 2017. At that time, participants agreed to cut their production overall by 1.8 million barrels per day.
In a note from Commerzbank, the German banking and financial services company said “the latest rise in oil prices is due primarily to Trump himself…he has focussed the market’s attention on the Iran sanctions again, even though the market is adequately supplied at present thanks to the increase in OPEC and Russian production.”
According to Reuters, an official with the Nigerian oil industry says OPEC will act to balance the market after oil prices hit four-year highs, but added that options to do so may be limited by available spare capacity.