The looming spectre of Iranian oil shipments has spooked world oil markets as the price of Brent crude has declined below $30 a barrel for the first time since 2004. Speculation is mounting that world oil markets could be in for a rough year as global demand continues to sag.

Despite US domestic concerns over the viability of an Iranian nuclear deal, it appears that an agreement is close to being achieved. Such a monumental step would allow Iranian crude oil to flow freely following the lifting of sanctions. Subsequently a nuclear deal could have a significant impact on world crude markets as Iranian exports could further depress a sector already mired in over-supply.

Subsequently, as the parties appear close to reaching a resolution, the increasing risks of the additional supply are being priced into global oil prices. In fact, crude oil prices in London have slumped over 1.8 percent whilst WTI desperately clings to the $30.00 handle. The widening gulf between Brent and WTI prices continues largely due to the risk that the additional seaborne supply poses to Brent.

Market Outlook

The return of Iran to the oil exporting fold has the potential to significantly impact global oil prices. The beleaguered state is likely to exacerbate the current global oversupply by an additional 500,000 barrels per day. This level of supply could potentially rise to 1 million barrels a day, within 6 months, following the lifting of sanctions.

Subsequently, Brent crude oil prices are likely to remain under pressure until some certainty is obtained regarding the lifting of sanctions. Currently, London crude oil is trading around the $29.92 a barrel mark but the additional Iranian supply could very well see prices around the $24.00 range. Subsequently, traders are keenly watching the outcome of the nuclear negotiations for a hint at Brent’s future trend direction.

In addition, poor US consumption and inventory data further complicates the markets view of future demand. As the world’s largest consumer of oil products markets typically look towards the US data for signs of strength. However, gasoline stockpiles continue to grow and are currently at over 240 million barrels, the highest since February of 2015. Subsequently, concerns continue to mount over a US led slowdown in demand that could have a long lasting impact in crude markets.

Given the current lack of demand, coupled with the continuing oversupply of crude, the coming quarter looks bleak for Brent and WTI prices. Crude oil markets are in a perilous position and as the essential rebalancing occurs we could very well see a significant change to the market structure and power of Middle Eastern participants in the coming year.

Risk Warning: Any form of trading or investment carries a high level of risk to your capital and you should only trade with money you can afford to lose. The information and strategies contained herein may not be suitable for all investors, so please ensure that you fully understand the risks involved and you are advised to seek independent advice from a registered financial advisor. The advice on this website is general in nature and does not take into account your objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances. The information in this article is not intended for residents of New Zealand and use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Knight Review is not a registered financial advisor and in no way intends to provide specific advice to you in any form whatsoever and provide no financial products or services for sale. As always, please take the time to consult with a registered financial advisor in your jurisdiction for a consideration of your specific circumstances.

Recommended Content


Recommended Content

Editors’ Picks

AUD/USD recovers further toward 0.6800 on risk-recovery

AUD/USD recovers further toward 0.6800 on risk-recovery

AUD/USD extends recovery toward 0.6800 in Asian trading on Thursday, despite mixed Australian employment data. The Aussie cheers a return of risk appetite, which weighs on the post-Fed US Dollar recovery. All eyes now remain on US economic data for fresh impetus. 

AUD/USD News
USD.JPY reverses sharply from 144.00, as US Dollar recovery fizzles

USD.JPY reverses sharply from 144.00, as US Dollar recovery fizzles

USD/JPY is attacking 143.00 in Thursday's Asian session, reversing sharply from 144.00. The pair pares back gains in tandem with the US Dollar, as the latter's post-Fed recovery falters due to a rebound in risk sentiment. The focus is next on the US data due later today and Friday's BoJ decision. 

USD/JPY News
Gold price regains positive traction amid a modest USD pullback from one-week high

Gold price regains positive traction amid a modest USD pullback from one-week high

Gold price attracts some dip-buying during the Asian session on Thursday and seems to have stalled its retracement slide from the $2,600 mark, or a fresh all-time peak touched the previous day. The US dollar trims a part of its intraday gains to a one-week high, which turns out to be a key factor lending support to the commodity.

Gold News
Bitcoin surges to $62,000 mark after 50 bps Fed rate cut

Bitcoin surges to $62,000 mark after 50 bps Fed rate cut

Bitcoin and Ripple eye for a rally as they break and find support around their resistance barrier. Meanwhile, Ethereum demonstrates signs of recovery as it approaches a critical resistance level, indicating that an upward rally could be on the horizon if it successfully breaks through.

Read more
Australian Unemployment Rate expected to hold steady at 4.2% in August

Australian Unemployment Rate expected to hold steady at 4.2% in August

The Australian Bureau of Statistics will release the monthly employment report at 1:30 GMT on Thursday. The country is expected to have added 25K new positions in August, while the Unemployment Rate is foreseen to remain steady at 4.2%.

Read more
Moneta Markets review 2024: All you need to know

Moneta Markets review 2024: All you need to know

VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.

Read More

Majors

Cryptocurrencies

Signatures