Investing.com – Donald Trump’s plan to keep oil prices low before next week’s U.S. midterm elections seems to be working, with crude starting November at 6-month lows after the president’s own assessment that sanctions against Iran won’t bite. Record high production of U.S. crude also is adding to the market’s slide.
What’s unclear though is whether oil bulls that chased prices up as Trump targeted Tehran will get any reprieve at all when the embargo against Islamic Republic’s oil exports officially begins in three days.
Trump said in a presidential memorandum on Wednesday there was sufficient supply of petroleum and petroleum products from nations other than Iran to permit a reduction in purchases from Tehran. India and South Korea agreed with the U.S. on the outline of deals that would allow them to keep importing some Iranian oil after this weekend, Bloomberg reported.
U.S. crude output, meanwhile, surged 416,000 barrels per day to a record 11.346 million bpd in August, government data showed.
“It’s a perfect storm for oil today and it’s what Donald Trump’s wanted. If you’re the president, you don’t want people to be driving to the voting station and filling up their cars with expensive gas,” Phil Davis at PSW Investments in New York said.
By 1:40 PM ET (17:40 GMT), U.S. was down $1.58, or 2.4%, to $63.73 per barrel. It earlier fell to $63.16, its lowest since March.
U.K. , the international benchmark for oil, was hit even harder, falling $2.41, or 3.2%, to $73.06. The session low was $72.57, a trough since August.
In October, both crude benchmarks posted their biggest monthly loss since July 2018, with WTI losing 11% and Brent 9%.
Thursday’s selloff baffled some traders who couldn’t understand the sudden breakdown in oil’s correlation with equities. Shares on rose for a third-straight day.
“The market is betting on supply that may be there later, but it is clear that it is not here now,” Phil Flynn, an analyst at the Price Futures Group in Chicago, who’s typically bullish on oil, said, referring to the Saudi assurance that it will pump all that’s needed to make up some 1.5-2.0 million barrels lost from Iranian output.
Others like Davis of PSW said oil was being driven down now by the same herd mentality that took it to four-year highs in September.
“It’s all speculation, but I believe there will be some impact from the Iran sanctions and that’s why I’m long WTI again from today as we could get to $67 after Thanksgiving Day,” said Davis, who admits profiting previously by shorting U.S. crude from $72 right down to Thursday’s low of $63.16.
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Source: Investing.com
