Oil spot prices rebound on US oil stocks expectations

on Nov 26, 2013
Updated: Oct 21, 2019

_iNVEZZ.com: Tuesday, November 26th:_

**Crude oil**
West Texas Intermediate prices on the NYMEX yesterday dropped 0.80 percent on the agreement between Iran and the P5+1 group over limiting Iran’s nuclear programme in exchange for sanctions easing. A rise in risk aversion in market sentiment along with an unexpected drop in US Pending Home Sales also had negative effect. The spot price for WTI dropped to an intra-day low at $93.09 per barrel while Brent crude touched a low at $108.03.

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Over the weekend, Iran and ‘P5+1’ (the five permanent members of the UN Security Council plus Germany) reached a deal for an easing of sanctions against the Islamic Republic conditional on certain reductions in the production of fissionable material.
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While Iran’s oil shipments were not part of the deal, the easing of banking and financial sanctions will facilitate the receipt of payments and issuing of cargo insurance, both being issues which have negatively impacted Iranian oil exports in recent months.

In its report of 14 November, the International Energy Agency said that Iran produced 715,000 barrels per day a day in October, well down on the 1.26 million in the prior month, while oil exports were at an average level of 1.1 million bpd in the first three quarters of the current year.
Frank Klumpp, an analyst at Landesbank Baden-Wuerttemberg in Stuttgart, says in a client note that “we have now removed Iran as the main geopolitical threat” and that ‘‘it is a bit surprising the market isn’t falling harder on the de-escalation”. The analyst concludes that “most market participants know that there’s no supply from Iran quickly coming back to the market and no quick return to full production”.

West Texas Intermediate and Brent have both recovered today following yesterday’s falls. WTI is currently trading at 94.29, while Brent is at 110.86.
Amrita Sen, chief oil market strategist at London’s Energy Aspects, says that “robust underlying demand suggests that it is not all doom and gloom out there”.

The American Petroleum Institute today is due to release last week’s US crude oil inventories, with expectations for a rise of 0.8 million barrels. Gasoline stocks are forecast to increase by 0.4 million barrels and distillate inventories are expected to be down by 0.8 million barrels.
Oil prices traded marginally higher this morning on conjecture that crude oil inventories will be down in tomorrow’s scheduled EIA release of the official inventory data, making for the first decline in more than two months. Forecast are for US crude stocks to have decreased by around 300,000 barrels last week.
That conjecture has also forced a shrinkage in the spread between WTI and Brent for the first time in five days.
**Natural gas**
The US winter fuel season is getting under way this week with colder weather starting to permeate the country. The latest weather forecasts have seen natural gas pricing in New York increasing for a fifth straight day today, to the highest point since 21 June at $3.879 per 1,000 cubic feet.
According to the EIA natural gas is used for heating in nearly 49 percent of US households, while 39 percent rely on electricity. The heating season usually runs from November through March. The price of heating oil has started to climb on increased demand and was trading at $3.0304 earlier today. Natural gas and heating oil are expected to increase in unison in the coming weeks, assuming the weather follows the script.
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