Oil Halts Gain Near 4-Year High
Oil halted gains near US$76 a barrel on emerging concerns prices have rallied too fast as traders bracing for Iranian supply losses sent crude to a four-year high.
Futures in New York fell as much as 0.6 percent on the 4th October. Prices have jumped four percent so far this week on concerns over tightening markets, with Iran at the risk of losing another customer, the United Arab Emirates.
Traders also shrugged off growing output from Saudi Arabia and Russia, as well as a gain in US inventories. Still, the Relative Strength Index topped 70 earlier this week for the first time since late June, signalling to some that the rally may be overdone.
Oil has rallied about 16 percent since mid-August on fears of a global supply crunch, prompting President Trump to repeatedly demand the Organisation of Petroleum Exporting Countries to lower prices.
While Saudi Arabia and Russia could pump more, traders continue to speculate whether OPEC and allied producers can offset a supply loss in Iran and declining production in Venezuela.
“Investors are betting the oil market will tighten as Saudi Arabia and Russia will not be able to fill the gap with optimum timing,” Takayuki Nogami, chief economist at Japan Oil, Gas and Metals National Corporation, said from Tokyo. Still “after the recent price rally, oil is now in the overbought territory, which could lead to profit-taking.”
Prices Slip
West Texas Intermediate for November delivery dropped as much as 42 cents to US$75.99 a barrel on the New York Mercantile Exchange and was at US$76.16 a barrel at 3:40 pm in Tokyo.
The contract climbed US$1.18 to US$76.41 on the 3rd October, the highest since November 2014. Total volume traded was about 31 percent below the 100-day average.
Brent for December settlement fell 0.4 percent to US$85.98 a barrel on the London-based ICE Futures Europe exchange. Prices rose 1.8 percent to US$86.29 on the 3rd October, the highest level since October 2014.
The global benchmark crude traded at a $9.98 premium to WTI for the same month.
With a November deadline to comply with renewed US sanctions approaching, Iran’s customers are increasingly being scared away. Iranian condensate cargoes to state-owned Emirates National Oil Company dropped by half in September, while customs officials in the United Arab Emirates are said to require oil tankers docking at Fujairah’s fuel terminal to provide a certificate attesting to the origin of their cargoes.
Pumping More
Saudi Arabia and Russia signalled they are doing their part to mitigate the loss. The two countries are pumping an extra one million barrels a day after OPEC and its allies pledged in June to boost production.
Russia, which already broke its post-Soviet output record last month, could add another 200,000 to 300,000 barrels a day of supply within a “few months” while Saudis suggested the kingdom may produce more in November than about 10.7 million barrels a day this month.
Meanwhile, US crude inventories rose 7.98 million barrels last week, the biggest gain since March last year, the Energy Information Administration reported. Stockpiles were forecast to have risen 1.5 million barrels in a Bloomberg survey of analysts before the EIA data was released on the 3rd October.
The bearish US inventory data “was overshadowed by various reports pointing to declining exports from Iran,” JOGMEC’s Takayuki Nogami said.
Source: Rigzone