Mubasher: Changes in the oil market would probably grow unpredictable in the coming months, analysts said, given that the sign dynamics, which shape crude futures, have shifted since the beginning of the price rally.
Uncertainties surrounding the balance between global supply and demand are mounting almost daily, PVM Oil Associates’ senior analyst Tamas Varga stated in a research note on Thursday.
“Political and economic events are shaping the oil market in a way that they have not shaped for quite some time,” Varga said.
Global benchmark Brent crude futures plunged almost 9% from last week’s record high of over $79 per barrel (pb), signalling higher supply from the de facto leader of the Organization of Petroleum Exporting Countries (OPEC), Saudi Arabia and other members of the group along with the United States.
Saudi Arabia reportedly ramped up oil exports to global markets by roughly 400,000 barrels per day (bpd) to 7.6 million bpd last month.
The US Energy Information Administration (EIA) reported that the country’s oil output hit beyond 11 million bpd for the first time, as the increase of shale drilling count added about 1 million bpd since November.
“The market will struggle for the next two months until the drop in Iranian exports materializes,” Energy Aspects analysts stated on Monday.
Whereas the US aims to re-instate sanctions on Iran, pushing countries to cease their crude imports from the country from 4 November, Washington could grant waivers to some of its allies, in particular those dependent on supplies from OPEC’s third largest producer. This would provide them the time to end their shipments.
On the other hand, some traders believe that the recent drop in oil prices would represent a buying opportunity, given that the sanctions against Tehran and worldwide disruptions could trigger once again concerns over supply shortage.
Amid the potential tightness in oil market, “our call for $85 a barrel by year-end remains in place,” despite the contradictory indicators in oil market, Morgan Stanely analysts said.
By 3:37 pm GMT, Brent crude futures rose 0.52% to $73.28 pb, while US Nymex futures climbed 1.63% to 69.88 pb.
