Oil prices are pointing higher for a fifth straight day. West Texas Intermediate oil for October delivery is trading at $58.27 in the Tuesday session, up 0.50% on the day. Earlier in the day, crude touched a high of $58.66, its highest level since July 16th.
Low U.S. Stockpiles Boost Crude
Crude oil recorded strong gains of 2.9% last week, buoyed by a report that showed a drop in U.S. stockpiles. The Energy Information Administration report found that crude inventories fell by 4.8 million barrels, a much stronger decline than the estimate of a decline of 2.8 million. U.S. stockpiles have now fallen for three straight weeks, which has contributed to higher oil prices.
Ahead – OPEC Meeting
OPEC members will meet on Wednesday for a two-day meeting. Investors shouldn’t expect any sudden moves in oil prices, as these meetings usually end without much fanfare. OPEC is expected to continue trimming crude production, which would help crude maintain its recent gains. OPEC often finds itself beset by internal divisions, which makes it difficult for the group to have a coherent stance. Saudi Arabia, the most important member, wants to keep oil prices steady. Iran, however, would love nothing more than to have oil prices jump, as a means of putting pressure on the U.S., as its economy is faltering due to bruising sanctions imposed by the United States.
Bottom line? I don’t expect the OPEC meeting to have a significant impact on oil prices, but with the volatile situation in the Middle East, a rise in tensions between Iran and its arch-enemies, Israel and Saudi Arabia, could quickly boost the price of crude.
Fed Mood Could Impact on Crude
There has been more talk about the U. S. heading towards a recession. Although growth has slowed, the U.S. economy is performing well, and I don’t see any fundamentals which are indicative of a recession. Still, the Federal Reserve carries a lot of weight for investors, and dovish messages about the economy from Fed Chair Jerome Powell and other policymakers could make the markets nervous and weigh on oil prices.
This article was originally posted on FX Empire
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