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James Hyerczyk
WTI and Brent Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Thursday after a steep sell-off was triggered the previous session by a report that President Trump weighed easing sanctions on Iran, which could raise global crude supply at a time when producers are worried about lower global demand growth.

At 10:07 GMT, November WTI crude oil futures are trading $55.34, down $0.33 or -0.59% and December Brent crude oil futures are trading $59.46, down $0.48 or -0.80%.

According to Bloomberg, Trump discussed easing sanctions on Iran to help secure a meeting with Iranian President Hassan Rouhani later this month.

The Bloomberg report, attributed to three unnamed sources, said then-National Security Advisor John Bolton argued against such as step. This may have been why Bolton was fired, or quit his position earlier in the week.

Not only will the easing of sanctions on Iran bring new oil into the market, but experts are saying it may hit the market before the end of the year. That’s a big concern because even if the U.S. and China strike a deal to end the trade war in October, two months will not be enough time to increase demand, adding further to a potential global supply glut.

Bringing more oil into the market will also undermine the OPEC-led attempt to tighten supply and stabilize prices by reducing output from its members and major ally producers.

U.S. Energy Information Administration Weekly Inventories Report

The EIA reported on Wednesday that U.S. crude supplies fell by 6.9 million barrels for the week-ended September 6. Traders were looking for a 2.8-million barrel draw down.

The EIA report also showed a weekly supply decline of 700,000 barrels for gasoline, while distillate stockpiles climbed by 2.7 million barrels. Analysts were looking for a 1.4 million barrel draw in gasoline and a 220,000 barrel rise in distillate supplies.

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It’s only speculation right now, but easing sanctions on Iran will be a bearish problem. The news has even offset the bullish tone sent earlier in the week when Prince Abdulaziz bin Salman, Saudi Arabia’s new energy minister, said oil policy would not change and said the OPEC+ output cut deal would be maintained.

The news caused investors to shift their focus from falling U.S. supplies that is occurring now to a potentially bearish oversupply in the future. Furthermore, crude oil traders are also showing little response to optimistic developments over U.S.-China trade relations.

 

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