Oil Surges on Iranian Sanctions, U.S-China Trade Talks

Oil prices surged on Wednesday, boosted by new U.S. sanctions on Iran and the announcement of new trade talks between China and the U.S. West Texas Intermediate for October delivery jumped 3.8% to close at $56.00, its largest one-day gain since mid-June.
Kenny Fisher
Grunge Iran and USA Flag
Grunge Iran and USA Flag

Oil has been showing strong volatility, and Wednesday’s gains come after a sharp slide of 4.8%, which began on Friday. Early in Thursday’s North American session, WTI is up marginally.

WTI/USD Daily Chart

Iranian Sanctions

The Trump administration continues to tighten its chokehold on Iran, as the White House announced new sanctions on Tehran. These measures are aimed specifically at Iran’s oil exports, and take aim at a shipping network that Iran uses to sell oil. The move was the catalyst for a sharp rise in oil prices, as it is becoming increasingly difficult for Iran to sell oil on world markets. This has reduced the global supply of oil and is putting upward pressure on oil prices.

U.S-China Trade Talks to Resume

A second development that boosted crude prices was the announcement by China that it would send a delegation to Washington in October to hold trade talks. The Chinese economy has been hit hard by the bitter trade war with the U.S., and a new trade deal would be boon to the giant Chinese economy, which would greatly increase Chinese demand for oil.

Ahead – Crude Oil Inventories, Employment Data

We could continue to see volatility in oil prices this week, with the release of key fundamental indicators. Later on Thursday, the U.S. releases Crude Oil Inventories, which can have a significant impact on the movement of crude. Last week, the indicator declined by 10.0 million, the sharpest decline in five weeks. Another sharp decline in the upcoming release could further boost oil prices.

Traders should also keep a close eye on Friday’s employment numbers. Wage growth is expected to remain unchanged at 0.3%, while nonfarm payrolls are projected to dip to 160 thousand. If these numbers prove to be stronger than expected, it would point to stronger economic growth in the U.S., and oil prices could move higher.

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