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Middle East Events Keep Oil Prices Firm

By:
Barry Norman

Crude oil was one of the most traded commodities over the US holiday. In Asia on Friday WTI dipped 52 cents to 42.52 while Brent oil declined 18 cents to

Middle East Events Keep Oil Prices Firm

Middle East Events Keep Oil Prices Firm
Middle East Events Keep Oil Prices Firm
Crude oil was one of the most traded commodities over the US holiday. In Asia on Friday WTI dipped 52 cents to 42.52 while Brent oil declined 18 cents to 45.44. Traders are closely monitoring the multiple situations in the Middle East. Tensions between Russia and Turkey continue to support prices even though the incident is now a battle of words after Turkey downed a Russia Fighter Jet.  Brent and US crude have gained compared with last week’s closes due to geopolitical risks in the Middle East after Turkey’s shooting down of Russian warplane. Russia threatened economic retaliation against Turkey on Thursday and said it was still awaiting a reasonable explanation, but Turkey dismissed the threats as “emotional” and “unfitting”. But some said Middle East geopolitical risk was unlikely to push oil prices higher.

Also holding traders attentions is the annual OPEC meeting scheduled the end of the coming week. The market is shifting its focus to a meeting of ministers from the Organisation of the Petroleum Exporting Countries, which is set for Vienna on Dec 4. OPEC is determined to keep pumping oil vigorously despite the resulting strain even on the policy’s chief architect Saudi Arabia, alarming weaker members who fear prices may slump further towards $20. Any policy U-turn would be possible only if large producers outside the Middle East agree to cut production.

The Russian Energy Minister said on Thursday that Russia and Saudi Arabia would set up a special joint working group on oil and gas cooperation to promote energy dialogue between the world’s top oil producers. Competition is growing in Russia’s biggest oil market. While Saudi Arabia’s encroachment in Europe is getting all the attention, the biggest threat comes from another part of the Middle East – Iran. The world’s largest oil exporter has started shipping crude to traditional Russian markets.

crude oil

As Iran re-enters the global markets with the UN expected to approve the Iranian Nuclear Agreement this month, Iran is expecting to return to markets in early January 2016. Iran will pitch more than 50 oil and natural gas projects to foreign investors at a two-day conference in Tehran starting on Saturday as the Persian Gulf country prepares for the end of sanctions that have stifled development and production of its energy wealth.  

A firmer US dollar also weighed on oil, making greenback-denominated contracts more expensive for holders of other currencies. Although trading was quiet after Thanksgiving Day in the United States with most traders enjoying the long holiday weekend. U.S. crude had been supported on Wednesday by a smaller-than-expected build in U.S. inventories and by a fall in oil rigs, a sign that drillers were waiting for higher prices before returning to the well pad. The data helped prevent deeper losses for WTI futures on Thursday, although trading was thin due to the U.S. Thanksgiving holiday.

brent oil

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