Breaking News
Ad-Free Version. Subscribe now to follow markets, faster and distraction-free. Upgrade now
Ad-Free Version. Subscribe now to follow markets, faster and distraction-free. More details

4 Things Now Pressuring Oil Prices

By (Ellen Wald)CommoditiesOct 03, 2019 05:23
4 Things Now Pressuring Oil Prices
By (Ellen Wald)   |  Oct 03, 2019 05:23
Saved. See Saved Items.
This article has already been saved in your Saved Items

Crude oil prices appear to have recovered after the attack on Saudia Arabia oil installations caused a spike mid-September. Immediately following the strike just two and a half weeks ago, Brent crude hit a 4-month high of $69.02. By Oct. 2, the price of Brent fell below $58.66—the same price it opened at exactly a month earlier, on Sept. 2.

Brent Oil Futures Weekly Chart
Brent Oil Futures Weekly Chart

Questions remain regarding Saudi Arabia’s ability to supply its customers with certain desirable crude grades, but, overall, the market shrugged off the implications of the attack on global oil supply. In fact, the primary indicators are all pushing prices down.

1. Demand Forecasts Revised Down

The International Energy Agency (IEA) is planning to revise its forecasts for oil demand growth down. On Tuesday the IEA Executive Director Fatih Birol told Bloomberg that the organization is currently predicting demand growth of only 1.1 million bpd—lower than the 1.4 million bpd of growth it predicted in May 2019—and this forecast will likely be revised even lower.

There is more cause for concern with September U.S. manufacturing activity falling to a 10-year low according to the survey of manufacturing activity released by the Institute for Supply Management (ISM) on Tuesday. A slowdown in U.S. manufacturing negatively impacts oil demand.

2. Geopolitical Tensions In Persian Gulf

Although Saudi Arabia was vocal in blaming Iran for the attacks on its Abqaiq and Khurais oil facilities, tensions between the two countries actually seem to be calming down. The speaker of the Iranian Parliament is open to the idea of starting a dialogue with Saudi Arabia and prefers diplomacy to military action as a means to resolve “security and political problems.”

Crown Prince Mohammed bin Salman also said he supports “a political solution” with Iran in comments he made in a 60 Minutes interview. Meanwhile, Iranian oil minister Bijan Zanganeh referred to the Saudi oil minister, Prince Abdulaziz bin Salman (half-brother to Crown Prince Mohammed bin Salman) as “a friend for over 22 years.” The relationship between the two oil ministers began when they shared the stage at an energy conference in Moscow.

While face-to-face talks between Saudi Arabia and Iran or the U.S. and Iran are not expected in the short-term, tensions have decreased. Two weeks ago, pundits were talking about the possibility of war breaking out and contemplating potential U.S. involvement in a violent conflict in the Persian Gulf. In a short time, the atmosphere has shifted and oil prices are reacting accordingly.

3. Over-Production By Russia, Iraq

Russia continues to over-produce from its agreed-to OPEC+ production quota. After agreeing to cut output to comply with its 11.17 million bpd quota at the September gathering of OPEC+ ministers, the latest data reveals that Russia reduced production only slightly from 11.29 million bpd to 11.25 million bpd, but claims it will fully comply with its quota in October.

Iraq is also reportedly overproducing after pledging to cut production to comply with its September OPEC quota. While Argus says Iraq is cutting production at its Majnoon oil field by 75,000 bpd, S&P Global Platts reports that Iraq overproduced the OPEC quota by 370,000 bpd. Like Russia’s September cut, Iraq’s cut is symbolic, but not a significant curtailment of supply. A new issue to keep abreast of in Iraq is the emergence anti-corruption and anti-Iran protests.

4. U.S. Oil And Gasoline Production

Oil’s decline was also fueled by this week’s EIA report, which revealed a 3.1 million barrel build in inventory last week. Refinery runs were also down by nearly 500,000 bpd. As refinery maintenance season in the United States gets started, these numbers are to be expected. Last week also saw similar builds in inventories and lower refinery runs.

However, unplanned outages experienced in several California refineries are also contributing to lower refinery utilization rates and higher crude oil storage numbers according to GasBuddy.

Crude Oil WTI Futures Weekly Chart
Crude Oil WTI Futures Weekly Chart


Looking ahead, some of these factors are more likely to weigh on oil prices than others. Gloomy economic data will continue to dominate headlines and push oil demand forecasts lower for 2019 unless October trade negotiations between the U.S. and China surprise with positive results.

Geopolitically, the Persian Gulf remains a potential hotbed, but tensions are just as likely to recede as they are to escalate. OPEC and OPEC+ will be meeting again at the beginning of December, and although production quotas are locked in through March, they may attempt to implement deeper cuts. Full compliance, especially from Russia and Iraq, is likely to remain as elusive as ever. The low refinery utilization numbers in the United States are seasonally appropriate and should resolve as usual.

4 Things Now Pressuring Oil Prices

Related Articles

Andy Hecht
What’s Wrong With Gold? By Andy Hecht - Mar 01, 2021

This article was written exclusively for Investing.comCommodities rising to new highs daily Gold lagging other precious metals Gold is resting, consolidating, and preparing for its...

Peter Krauth
A Golden Election Promise By Peter Krauth - Nov 03, 2020 1

There’s no shortage of prognostications or conjecture about the U.S. election. Of course, everyone has an opinion. Some like red, some like blue, some like neither. Last week’s...

4 Things Now Pressuring Oil Prices

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
Binoy Kanchanwala
Binoy Kanchanwala Oct 03, 2019 14:54
Saved. See Saved Items.
This comment has already been saved in your Saved Items
good insight
Michel Simard
Michel Simard Oct 03, 2019 5:58
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Very good Analyst of the current situation. Thks
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email