Commodity: Crude Oil Drops on Potential Surge in Barrels
COMMODITY – For more than two weeks, crude dropped to the lowest as investors considered the potential increase in barrels from Saudi Arabia and Russia. This is despite the concern about the Iranian sanctions that it might inflict a global supply crunch.
On the fourth day, the futures in New York declined, closing down 0.3% on Monday. Meanwhile, South Korea was the first top-three oil customers of Iran to meet a US demand that buyers cut imports to zero. The speculation that Saudi Arabia and Russia will occupy in any supply has helped to eliminate a rally. Moreover, the market was pressured and hit the bottom due to the US-China trade war as well as the expected increase in supply at the key U.S. storage hub at Cushing.
“[Investors will be watching to see if] the Russians and the Saudis continue to put more oil on the market. That will basically negate some of the worries about tightening supply. At the same time, Trump’s fresh tariff threats don’t really “sit well with the demand side of the market,” said Gene McGillian, manager of market research at Tradition Energy.
Larger producers – both China and India – have restrained their purchase from the OPEC. South Korea, however, headed the game through halting purchase before the imposition of US sanctions to Iran on November 4. On Friday, US President Donald Trump wanted to impose further high tariffs on Chinese goods, mentioning that he is ready to tax all goods on short notice.
The October delivery of the West Texas Intermediate declined 21 cents in settling at $67.54 a barrel on the New York Mercantile Exchange. On Monday, the total volume recorded a drop of 11% from the 100-day average.
Forecast revealed that Oklahoma has made an increase of 900,000 barrels last week, making the fifth consecutive weekly surge in unless the Energy Information Administration will confirm it on Wednesday.
The futures of WTI crude declined to a 13% premium to its second-month contract. This was its smallest premium since June.
“If Cushing continues to build, the spreads are going to get weaker,” said Commodity Fund Manager Tariq Zahir of Tyche Capital Advisors LLC.
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