According to the news report by Reuters, Oil prices have been mixed after data indicated that the crude oil inventories in the US might build up. Weekly data released by Bloomberg indicated that American oil inventories are going up, which is in contradiction to a report that was released earlier by energy information supplier Genscape, which had stated that inventories in the US were actually declining.
During early trading, the price of oil was going up, with the markets looking bullish. However, after Bloomberg’s report was released, buyer enthusiasm died down and prices steadied.
US crude oil benchmark, West Texas Intermediate futures dropped by 21 cents to $67.54 per barrel, before finally settling at $68.005 a barrel.
The international crude oil benchmark the Brent crude rose by 54 cents to trade at $77.37 per barrel after it had touched a new high of $77.92 per barrel. The price of oil on this benchmark settled at $77.78 per barrel.
Early during the trading day, the price of crude oil has strengthened as news came of the growth of US rigs’ drilling going down. Another factor that was putting the brakes on the price of oil was the expectation of lower crude supplies once the latest US sanctions against Iran’s oil exports were initiated in November.
According to Price Futures Group’s analyst Phil Flynn, the low rig count in the US only set the stage for oil production to go higher. However, he said, there was always the possibility of storms which could impact production and inventories for some time.
Baker Hughes also reported last week on Friday that the US drillers had cut down the number of oil rigs to 860, which was two 2 than the previous week. The growth in the number of oil producing rigs has been stuck since May this year for a number of reasons.
Firstly, the lack of increase in the number of oil rigs shows an increase in well productivity. However, the bad news is that it is also because of infrastructure constraints as well as bottlenecks in the production, pipeline and storage.
French bank BNP Paribas’ oil strategist Harry Tchilinguirian opined that the oil price increase is built on multiple assumptions such as lowered exports from Iran – caused by US sanctions against that country, a lack of stability in oil production in countries such as Libya and Venezuela and US shale oil growth being capped. Another assumption is that there will be no impact from the trade war between the US and China.
In this situation, Tchilinguirian stated that the Brent could end up trading at more than $80 per barrel.
However, CNBC’s reports stated that the founder and chairman of FACTS Global Energy, Fereidun Fesharaki feels that if the US sanctions were not in place, then the price of crude could be at the $70 mark or even lower. However, with the US sanctions in place, he feels that crude oil prices could go up to as much as $100 a barrel.
Fesharaki also said that if these sanctions are enacted properly, then there is no one to blame but the Trump administration for the rising crude oil prices. The US has given buyers of Iranian oil until November 4 to stop buying oil from the Middle Eastern country to avoid being sanctioned themselves.
Cutting off supplies from Iran would definitely push the price of oil up, since it is one of the biggest oil exporters in the world. Other oil exporters would not be able to scale up enough to fill the gap caused by Iran causing oil to go up to $100 per barrel.