Crude oil futures headed higher for the first time in the European morning session this week as the US sanctions on Iran draw closer, but risks to global growth economic continue to loom over potential gains.
At 1055 GMT, December ICE Brent crude futures were up 39 cents from Tuesday’s settle at $76.30/b, while the NYMEX December light sweet crude contract was 25 cents higher at $66.43/b.
“The market has finally found a bit of support,” Head of Research at Sucden Financial in London Geordie Wilkes said. “The market was pretty overbought when it was up above $85 and we needed to retreat back towards $80. Following the news about Saudi output and trade wars $75/b looks like a pretty strong support level.”
Nonetheless bullish positions have retreated as net speculative length as fallen by the equivalent of 130 million barrels or 37% to the lowest level since September 2017, analysts at PVM said in a note Wednesday.
Sunday’s sanctions on Iran have been overshadowed by threat of an escalation of the trade war between the US and China. This has hung over sentiment as US President Donald Trump threatens to slap yet more tariffs on all Chinese imports in December, if talks between the world’s two largest economies do not ease the tensions next month.
“Such threats do not bode well for the health of the global economy and therefore for oil demand prospects….Emerging-market economies in particular are suffering from a double whammy of rising energy prices and sliding currencies,” the PVM note said. “All this will serve to undermine fuel demand, to the potential chagrin of oil-producing countries.”
Another headache for investors to look out for is the US mid-term elections on November 6 which could shake up the market. “We will be seeing cautiousness about the mid-term elections and what that will mean for the financial markets in terms of the dollar, more tax cuts; those are the questions that need answering.” Wilkes said.
Looking at the latest stock data, the American Petroleum Institute showed Tuesday a build of 5.7 million barrels in crude oil stockpiles, the sixth consecutive week of growth as slower winter demand begins to grip the market. The market now awaits the Energy Information Administration data later Wednesday. Platts.com
