Crude Oil Price To Bypass OPEC Meeting For Trade Wars, Fed Minutes

OIL FUNDAMENTAL FORECAST: BEARISH

  • Crude oil prices rose as US delayed auto tariffs, the S&P 500 climbed
  • Oil gains on OPEC+ meeting, where Iran will be absent, may be offset
  • Risks to crude oil are trade wars, FOMC minutes and client positioning

CRUDE OIL PRICES WRAP

Crude oil prices spent most of last week recovering from the near-term downtrend since late April, at one point rising nearly 4 percent. This occurred amidst the backdrop of cooled US-China trade tensions and rosy earnings from Walmart and Cisco on Thursday which sent the sentiment-linked commodity higher alongside the S&P 500. Oil also briefly enjoyed that the US delayed a decision to impose auto tariffs.

OPEC+ MEETING AND OIL SUPPLY DISRUPTION CONCERNS

Before the new week even begins, crude oil prices may face supply-related volatility in the aftermath of this weekend’s OPEC+ Joint Ministerial Monitoring Committee. As a reminder, the oil-producing cartel has been taking measures to reduce output and uphold the commodity. Members, excluding Iran, will be meeting in Jeddah, Saudi Arabia, to monitor the status of meeting their targets.

Iran has been excluded amidst geopolitical tensions between it and the United States. US President Donald Trump has financially sanctioned the nation and countries that purchase oil from it. This risks sending prices higher on supply-disruption concerns. On the chart below, Iranian oil production has declined over 30% since last year and will likely continue plummeting.

This raises the question of whether or not OPEC will address a larger-than-expected shortfall in output. If it doesn’t, this risks increasing tensions with the US given how frequently Mr. Trump expresses displeasure with higher prices while domestic production runs high. As such, gains for oil to be had in the aftermath of the meeting can be offset. 

IRAN OIL OUTPUT FALLING

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