Brent Crude displays a strong gain ahead of Iranian sanctions and an apparent refusal to increase production levels by OPEC.
Both Brent and WTI prices recorded a significant increase yesterday with clear a slow-down in trading volumes for crude oil futures compared to previous sessions. This suggests that traders are confident that the current trend for oil prices will be bullish and are buying with apparent conviction.
The main factor behind yesterday’s strong price movement was the unwillingness shown by OPEC to raise output. In addition to this, production levels in Iran are showing a sharper decline than initially forecast ahead of the rigid sanctions forced upon the country by the US, which target crude oil exports in particular.
Donald Trump has made threats towards OPEC, urging them to make up the shortfall left by Iran in order to keep their relationship with the US intact but recent statements suggest that fresh output is unlikely.
Saudi Arabia and Russia both confirmed that there will be no rise in production - unwelcomed news for President Trump who is striving towards low oil prices.
However, things can change quickly in the oil market and Saudi Oil Minister, Khalid al-Falih has hinted towards a potential rise in production if US sanctions result in tight supply when they are imposed in November.
The threat of short supply on the back of these sanctions is one of the few fundamentals offering resistance to the bulls at present.
Rising oil prices has a direct impact on the electricity and gas markets, if you wish to find out more how this may affect you please do not hesitate to call us on 01257 239500.