Oil Prices Sluggish on Climbing U.S. Inventories
USA — September 11, 2018
Earlier this week oil prices destabilized a bit on fears U.S. inventories might climb. Traders reacted to a Bloomberg report which contradicted previous data from energy information firm Genscape.
U.S. crude futures ended down 21 cents at $67.54 a barrel as of Monday. Brent crude oil was up 35 cents at $77.18 a barrel after reaching a high of $77.92 a barrel.
Previously, crude prices had risen on reports U.S. drilling was sagging, which led investors to anticipate lower supply. Sanctions against Iran also led to high expectations over exports for November. Phil Flynn, an analyst at Price Futures Group told reporters:
"The low rig count set the stage for us to move higher. At the end of the day you also have storms that could impact inventories for some time to come."
Drilling in the U.S. stalled as of May owing to bottlenecks from infrastructure hurdles, according to experts.
Growth in the number of rigs drilling for oil in the United States has stalled since May, reflecting increases in well productivity but also infrastructure bottlenecks and emerging countries’ roles. Outside the United States, Iranian crude oil exports are declining ahead of a November deadline for the implementation of new U.S. sanctions.
While Iranian oil consumers oppose the Washington sanctions, none have so far stood up to the Trump administration. Only India seems unwilling to fully comply with American sanctions toward Iran, and U.S. Secretary of State Mike Pompeo, who met with top Indian officials to discuss Iranian oil, said that the U.S. would consider waivers. U.S. Energy Secretary Rick Perry will meet his counterparts from Saudi Arabia and Russia on Monday and Thursday respectively as the Trump administration encourages the world's biggest producers and exporters to elevate output to compensate for the Iran situation.
Investors worry over these recent trade disputes because of the pressure put on emerging producers. Higher demand is certain to lift prices, but the administration seems to be putting a lot of faith in OPEC to pick up the slack.