Oil drops 4% in five days on record US crude output ahead of US elections, Fed verdict; Brent settles at $73/bbl
- Brent futures were up 29 cents, or 0.4 per cent, to settle at $73.10 a barrel. US West Texas Intermediate (WTI) crude gained 23 cents, or 0.3 per cent, to settle at $69.49
International crude oil prices edged up in the previous session on reports that Iran was preparing a retaliatory strike on Israel from Iraq in the coming days. Still, a record US crude output weighed oil prices ahead of the US elections and the US Federal Reserve meeting verdict in the coming week.
Brent futures were up 29 cents, or 0.4 per cent, to settle at $73.10 a barrel. US West Texas Intermediate (WTI) crude gained 23 cents, or 0.3 per cent, to settle at $69.49. Both benchmarks were up over $2 a barrel at their session highs. Brent posted a weekly decline of about four per cent, with WTI down about three per cent. Back home, crude oil futures last settled 2.71 per cent higher at ₹5,981 per barrel on the multi-commodity exchange (MCX).
Also Read: Oil-giant Chevron eyes possible layoffs in US as part of its $3 billion cost cutting measures
What's weighing on crude oil prices?
-On Thursday, US news website Axios reported that Israeli intelligence suggests that Iran is preparing to attack Israel from Iraq within days. Any additional responses from Iran might remain restrained, similar to Israel's limited strike last weekend, hence primarily intended as a demonstration of strength rather than an invitation to open warfare.
-Iran and Israel have engaged in a series of tit-for-tat strikes within the broader Middle East warfare set off by fighting in Gaza. According to news agency Reuters, previous Iranian air attacks on Israel on October 1, 2024, and in April were mostly repelled, with only minor damage.
-Iran is a member of the Organization of the Petroleum Exporting Countries (OPEC) and produced about four million barrels per day (bpd) of oil in 2023, the US Energy Information Administration (EIA) data showed.
-According to analysts and US government reports, Iran was on track to export around 1.5 million bpd in 2024, up from an estimated 1.4 million bpd in 2023. Iran backs several groups that are currently fighting Israel, including Hezbollah in Lebanon, Hamas in Gaza and the Houthis in Yemen.
-A US official asked Lebanon to declare a unilateral ceasefire with Israel to revive stalled talks to end Israeli-Hezbollah hostilities, a senior Lebanese political source and a senior diplomat said - a claim denied by both sides.
-Oil prices were also supported by expectations that OPEC could delay December's planned increase in oil production by a month or more due to concern over soft oil demand and rising supply. A decision could be made as early as next week. OPEC includes OPEC and its allies like Russia and Kazakhstan.
-As OPEC holds back on production, US oil major Exxon Mobil said its global output hit an all-time high, while Chevron said its US production hit a record high. The EIA noted that drillers pulled a record 13.5 million bpd of oil from the ground. EIA noted that August's output hit a record 13.4 million bpd and that annual output was on track to hit 13.2 million bpd in 2024 and 13.5 million bpd in 2025.
-US job growth almost stalled in October as labour strikes in the aerospace industry depressed manufacturing employment. Hurricanes also impacted the response rate for the payrolls survey, making it hard to get a clear picture of the labour market ahead of next week's presidential election.
-National and statewide vote polls in the US show the US presidential race is a toss-up between Democratic Vice President Kamala Harris or Republican former President Donald Trump as the country's next president.
-Economists expect the US Federal Reserve to cut interest rates by 25 basis points next Thursday. After aggressively hiking rates in 2022 and 2023 to tame a surge in inflation, the Fed started lowering rates in September. Lower rates decrease borrowing costs, boosting economic growth and oil demand.
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