Crude Oil: With Iran sanctions set to take effect in a few days, the market is awaiting further clarity. Saudi Arabia and Russia have vowed to cover any supply shortfall, but Iran’s oil exports likely won’t go to zero. “I expect investors will take a wait-and-see stance this week before the return of sanctions on Iran and U.S. midterm elections,” Makiko Tsugata, a senior analyst at Mizuho Securities Co., told Bloomberg. Even though Iran is set to lose a significant portion of its exports, “if both Saudi Arabia and Russia boost output and U.S. production continues to rise, we could have a supply glut.”
Crude oil posted steep losses over the past two weeks, the result of growing concerns about the health of the global economy. Other commodities, including copper, have also seen volatility. “It is often said that when stock markets sneeze, commodities catch a cold. This adage was on full display last week as a global rout on equity gauges dragged the energy complex lower,” PVM Oil Associates strategist Stephen Brennock said to Reuters.
Hedge funds and other money managers continued to liquidate their bullish positions on crude oil futures, a sign that investors are increasingly pessimistic about the trajectory for oil prices. The ratio of long to short positions fell to 6:1, down from 12:1 at the end of September, according to Reuters. |
