Increased conflict could spill over into the broader Middle East region and threaten key choke points for crude oil transit and production, including in the northern Iraqi border region near Syria.
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The daily OPEC Basket Price fell to $39.21 a barrel on November 13, according to an e-mail on Monday from the organization’s secretariat in Vienna.
US crude supplies probably rose by 2 million barrels last week, according to a Bloomberg survey before Energy Information Administration data Wednesday. The EIA thinks that United States production will drop to 8.8 million barrels a day next year, of which about 4 million would be shale oil-hardly a death blow.
Earlier the same day, Citi’s Ed Morse said in a note that low prices are simply a reflection of an oversupply of oil, in addition to “increasingly fraught competition” for market share among OPEC members, not to mention between them and Russian Federation.
For most in the US, and elsewhere, the low price of crude is a godsend, helping to alleviate high gas prices, which has translated into higher personal savings and lower operating costs for many companies.
Oil prices last week racked up their biggest weekly losses in eight months, pressured by swelling storage of crude on both land and sea.
Once markets settled following a nervous start, oil prices began rising.
Martinez said with oil trading near its six-year lows, the healthy demand has prevented prices from dropping further amid the worsening oil glut due to oversupply.
WTI options for December will expire on Tuesday.
Crude oil extended its slide into a second week as United States stockpiles rose more than expected and the IEA said that OECD inventories had reached a record above 3 billion barrels.
Then you have the threat of Iran boosting oil exports by up to 500,000 barrels daily once sanctions are lifted.
Similar positions are being taken in internationally traded Brent futures, with the volumes of options to sell at $40, $35, $30 and even $25 per barrel if prices fall to those levels between December this year and June 2016 all soaring over the last month.
“Due to the intensifying demand for oil amidst times of uncertainty, oil prices historically increase due to global conflict”, added Jonathan Sudaria at London Capital Group.
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The current negative momentum could see Brent crude trade down to $43.25/barrel, which is not far from the August low at $42.23/b.
