Market Report & Analysis for 10/2/2018 Morning Edition

Morning Market Overview

Oil prices ended last week modestly higher for the third weekly gain in a row as the concern over the loss of production from new sanctions likely to be installed on Iran by the US is outweighing potential increases in production from OPEC and the US. Exports from Iran have been declining as companies back off from liftings in anticipation of new US sanctions.

Crude oil has been in a steady uptrend since dipping modestly in the middle of August. The spot Brent contract is solidly above the $80/bbl level for the fifth trading session in a row. Last week OPEC failed to announce any recommendations to increase production ahead of the new sanctions while US rigs deployed to the oil sector have topped weeks ago suggesting that the meteoric growth rate of US production could possibly ease in the coming months. All signs still point to a high volatility market environment with an upside bias. The bullish view still the predominant market sentiment.

This said the most significant bearish variable/unknown (at this time) that could significantly derail the upward momentum in prices would be the US and Iran coming to the table to hash out revisions to the nuclear deal. This would result in a very quick and strong drop in prices… between $5 to $10/bbl or more. Friday afternoon the latest Baker Hughes data hit the media airwaves reporting the number of rigs deployed to the US oil sector decreased by 3 rigs on the week after increasing during the previous week.

Total rigs deployed to the oil sector are higher by 113 or 15.1 percent year over year. Total US crude oil production is about 25.1 percent above where it was for the same week a year ago. This week’s production came in at 11.1 million bpd.