Oil prices slipped slightly on Tuesday after a three-day rally, however, prices are still close to four-year highs as the market jitters over the looming Trump administration sanctions on Iranian crude. Total photo.
Oil prices supported by Iran supply, global demand concerns
Oil prices dipped slightly on Tuesday, but after the recent three-day rally, oil prices remain close to four-year highs on concerns that the Trump administration’s sanctions against Iranian crude exports will tighten the global supply of oil.
By 4:17 p.m., EDT, benchmark Brent crude was down 36 cents to $84.62/barrel and US West Texas Intermediate fell 17 cents to $75.13/barrel. The Canadian Crude Index slipped $1.29 to $37.65.
“This is the market catching its breath,” Gene McGillian, director of market research at Tradition Energy, told Reuters.
Along with concerns over the Iranian sanctions, prices are supported by strong global demand that has not faltered despite rising trade tensions between the US and China.
Reuters reports that a survey of OPEC production found Iranian output fell by 100,000 barrels per day (b/d) in September and overall OPEC production rose by 90,000 b/d in August. At its peak, Iran supplied nearly 3 per cent of the world’s daily crude consumption.
The Trump administration’s sanctions against Iranian oil are set to go into effect on Nov. 4.
“Our oil analysts believe there is now a growing risk it (crude) could touch $100 per barrel,” according to HSBC’s fourth-quarter Global Economics outlook.
A number of analysts say they believe OPEC will struggle to cover the losses in production due to the sanctions, but Britain’s Barclays bank says “OPEC has ample spare capacity”.
Since hitting lows of below $30/barrel in January of 2016, oil prices have almost tripled mostly due to the OPEC supply cut agreement that balanced the market.
Now, rising oil prices coupled with weak emerging market currencies may stall economic growth
“Softening demand growth and new supply should cool the bullish sentiment and push prices lower by the end of the year,” Reuters reports Barclays said.
Analysts polled prior to data on US crude inventories are predicting an increase in US crude stocks of about 2 million barrels. API data will be released at 4:30 p.m., on Tuesday while the US Energy Information Administration will offer its report on Wednesday morning.
According to Reuters, the mood of the oil market was lifted after Sunday’s announcement of a trilateral trade deal between the United States, Canada and Mexico.