OPEC+ will not increase production in December, Iran threatens to launch new attack on Israel
OPEC+ has postponed increasing oil production. Crude oil prices gained more than 2% at the start of the week, just before the US elections and the Fed’s decision. However, the main driver of oil prices at the moment is the news that OPEC+ decided over the weekend to postpone the production increase by a month. OPEC+ previously announced that production was to increase by 180,000 barrels per day each month starting in October, but this decision was later postponed until December. Now, the increase in production is expected to begin in January.
Currently, OPEC+ is under no pressure to increase production, due to the uncertainty surrounding demand. In addition, a large part of the countries participating in the production reduction agreement are already producing more. In October alone, OPEC+ production increased by 400,000 barrels per day, mainly due to Libya’s restoration of production. The next OPEC+ meeting is scheduled for December 1.
Iran threatens new attacks
In a speech over the weekend, Iran’s supreme leader threatened Israel and the United States, saying that after the presidential election, but before the inauguration of the new president, Iran would decide to an overwhelming military response to recent actions. Ayatollah Ali Khamenei said the attack would not be limited to the use of drones and missiles. This in turn creates additional uncertainty regarding the supply situation in the oil market.
Oil and the American elections
Uncertainty in the oil market is heightened by the US elections and the Fed’s decision this week. Recently, we have seen a breakdown in the correlation between yields and crude oil. US bond yields remain high, driven by the risk premium linked to Trump’s recent surge in popularity and reduced expectations for US interest rate cuts. On the other hand, if Harris wins the election and the Fed takes a dovish stance after the latest weak US data, yields could fall, reducing upward pressure on prices. Recently, many forecasts (including those from Citi and JP Morgan) have indicated that oversupply in the oil market could push prices down to $60 per barrel next year.
WTI crude oil returned above $70 per barrel today, attempting to break above the 25-day and 50-day moving averages. If it succeeds, the next significant resistance level lies between $72 and $73 per barrel. It should be noted that speculative positions in oil are again extremely low, as in September or January of this year. Source : xStation5
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