
Oil prices down despite tighter supply concerns
On Tuesday, profit taking by investors resulted in a drop in oil prices, despite threats from Turkey to stop crude exports from Iraq’s Kurdistan region from reaching Turkish ports, and from there, global markets.
By 4:35 p.m. EDT, Brent crude had fallen 50 cents to $57.93/barrel and US WTI was down 32 cents to $51.90/barrel.
In response to the Kurdish referendum on independence, Turkish President Tayyip Erdogan repeated his threat to cut off the pipeline that carries between 500,000 to 600,000 barrels per day (b/d) of crude from northern Iraq to the Turkish port of Ceyhan.
This potential loss of supply coupled with the OPEC output reduction of 1.8 million b/d raised concerns that the oil market was showing signs of tightening.
Reuters reports JBC Energy said in a note “Although there was plenty of price-bullish news making headlines yesterday, undoubtedly the biggest factor was the referendum in the Kurdistan region of Iraq.”
Results from the vote will be announced later in the week.
Despite a number of signs pointing to a tighter market, oil prices fell on Tuesday as investors took advantage of the recent rally that brought prices up to levels not seen in over two years.
“The market was approaching, if not in, overbought territory,” Robert Yawger, director of energy futures at Mizuho Americas told Reuters.
“We prefer to take a pause at $60.00 a barrel (for) Brent,” Olivier Jakob, Petromatrix strategist, wrote in a note.
Reuters reports top oil executives gathered at the S&P Global Platts APPEC conference in Singapore see that a strong demand for crude this year will help tackle the stubborn crude glut and accelerate market rebalancing.
But, increasing production in the United States may throw a spanner in the works.
US crude stocks are likely 2.3 million barrels higher last week, according to analysts polled prior to release of data from the American Petroleum Institute on Tuesday and the US Energy Information Administration on Wednesday.
In the aftermath of Hurricane Harvey, US crude inventories have risen as refineries have been slow to restart operations after the devastating storm.
Last week, the EIA reported US crude stocks were up 4.6 million barrels on increased imports of 734,000 b/d and higher production amounting to 157,000 b/d. In total, US production last week reached 9.51 million b/d, close to levels just prior to Hurricane Harvey’s arrival.
“The all-time record [for domestic production] is 9.61 million June 2015, last week’s report was 100,000 barrels off of that,” Robert Yawger told Reuters. He added “With that in mind no one wants to ride that long position into the EIA report.”