OIL IS VOLATILE AHEAD OF REPORTS
It has been a busy month for oil futures which were down Monday ahead of the release of two highly anticipated oil market reports and geopolitical storms brewing on the horizon.
Investors are in wait-and-see mode ahead of the release of oil-market data from the Organization of the Petroleum Exporting Countries on Wednesday and the International Energy Agency on Thursday.
Brent crude, the global oil benchmark, fell 0.45% to $55.37 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 0.06% at $49.25 a barrel.
Brent hit a two-year high earlier in October on positive sentiment about OPEC’s ongoing effort to rebalance the market and eliminate about 2% of global supply with the help of external producers such as Russia.
But crude prices have since sagged as investors dialed down their expectations of a continued supply action after the deal expires in March of 2018.
The latest data shows global inventories remain elevated.
Stocks in the Organization for Economic Cooperation and Development fell for the third consecutive month in July, to 3.002 million barrels a day but remain 195 million barrels above OPEC’s target of the last five-year average.
Risks to the oil price from Hurricane Nate, which last week brought the closure of almost 90% of U.S. oil infrastructure in the Gulf of Mexico, appeared to have fizzled out.
Now the oil market is bracing for political storms in the Kurdish region of Iraq and Iran.
“It’s almost like an October surprise that we could have a couple of events that could be impactful for the oil market coming in brief,” said Helima Croft, head of global commodity strategy for RBC Capital Markets.
RISK OF IRAQI-KURDISH CLASH RISES
The risk of an Iraqi-Kurdish clash has increased following the independence vote in the oil-rich Kurdish region, write Isabel Coles and Ali A. Nabhan.
Kurdish forces recently defeated Islamic State militants occupying parts of their territory, removing the last buffer preventing a potential escalation of a dispute with Baghdad.
The Iraqi central government has threatened Kurdistan over last month’s referendum where Kurdish voters overwhelmingly cast their ballot in favor of independence from Iraq.
The vote result may trigger a hostile response from Iraq’s government, as well as from neighboring countries and disrupt the flow of as much as 500,000 barrels a day of Kurdish oil exported through a Turkish port.
TRUMP EXPECTED TO REFUSE TO CERTIFY IRAN’S COMPLIANCE WITH DEAL
President Donald Trump is expected to refuse to certify that Iran is in compliance with the 2015 international nuclear agreement, which Mr. Trump has called “the worst deal ever.” The move could trigger additional U.S. sanctions against Tehran.
A U.S. move to decertify Iran could “bring an additional layer of geopolitical uncertainty,“ said Olivier Jakob, managing director at oil consultancy Petromatrix. “
Iran boosted its oil production after international sanctions against the nation were removed in early 2016 as part of a nuclear deal with six world powers.