Yahoo Finance Oil Edges up; U.S. Crude Seen Below $65 Despite Iran, Saudi Crises
Investing.com - Oil prices settled up on Monday but some traders said they did not believe Impending Iranian sanctions and Saudi-West tensions will stop crude from sliding below $65 a barrel.
A fifth-weekly stockpile rise could also be the next shoe to drop on the West Texas Intermediate (WTI) crude market, especially if it’s another outsize build. Traders note that WTI is already in contango mode, where the front-month is at a discount to its second most-active contract and such a weak structure would be more vulnerable to any storage builds announced by the U.S. government Wednesday.
In Monday’s market, WTI settled up 5 cents up at $69.17 per barrel after sliding to a session low of $68.47 earlier.
“Long-dated charts are targeting $64 for WTI, and that’s become a downside objectives for technicians,” said John Kilduff, partner at New York energy hedge fund Again Capital.
Tariq Zahir, managing member of oil-focused fund Tyche Capital Advisors in New York, also thinks U.S. crude futures could get below $65 this week, especially if Wall Street tanks or Treasury yields spike again.
“WTI has been into a contango for a while and this should continue to put pressure on spot prices. If the S&P closes below the 200-day moving average or the 10-Year yield breaks the recent high, we will go into another risk-off mode and that could really clobber WTI to the sub-$65 level,” Zahir said.
Brent, the global benchmark for oil, was flat at $79.78 per barrel on its front-month December contract by 2:37 PM ET (18:37 GMT). It had earlier fallen to $78.99.
U.S. sanctions against Iranian oil exports, due on Nov. 4, had boosted oil prices by as much as 25% initially this year. Brent now shows a gain of just over 20% on the year while WTI is up by less than 15%.
The fear factor attached to Iran has worn off in recent weeks after reports by the EIA, OPEC and the West’s energy watchdog IEA indicated comfortable and growing supplies for oil. U.S. oil services firm Baker Hughes, meanwhile, has reported the U.S. oil rig count at 3-1/2 year highs, indicating more drilling for crude.
Brent was also pressured by Saudi Oil Minister Khalid al-Falih’s remarks on Monday that the kingdom has no intention of unleashing a 1973-style oil embargo on Western consumers, despite its worsening crisis from allegations that it murdered journalist Jamal Khashoggi. Instead of restricting supplies, Saudi Arabia would do utmost to increase them, the minister said.
“They want to be seen as the Steady Eddie of the market and they’re overcompensating supply to distract attention from the Khashoggi matter. That can’t be good for prices,” Kilduff said.
Related Articles
Gold in Sluggish Trade as Focus Moves to U.S. Midterm Elections
Mexico to consider all actions in response to Canadian steel tariffs
