Oil: Saudi Arabia will fail to compensate for Iranian delivery

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Exchange futures for Brent crude traded higher in early Tuesday, continuing to recover from early session on Monday. Traders say the catalyst for today’s movements is a resurgence of fears about reduction of deliveries of oil from Iran. In addition, the sudden formation of a hurricane in the Gulf of Mexico will create problems for refineries in the Gulf of Mexico.
Speculators also helped the markets to recover from weakness earlier session, given the increased long bets in response to an attempt by China to stimulate the economy. However, the main driver of the market is the report that shows that the supply of oil from Iran fell in the first week of October, according to the plants and the power industry. Apparently, the decline was fueled by buyers who were looking for alternatives before US sanctions 4 Nov. This report again raised concerns about the ability of OPEC to cover the widely expected shortage of supply.
On Monday crude oil prices fell early on session in response to the message that Saudi Arabia is ready to replace all the lost oil due to sanctions. Saudi Arabia also said it plans to raise oil production to levels above 10 million barrels per day. The forecast for next month will be determined by how much exports to Iran, and whether Saudi Arabia to replace the lost products. Iranian oil exports are decreasing rapidly, and the Saudis have to find a way to quickly increase production.
At the same time, oil Minister of Iran said that Saudi Arabia will not be able to fully offset the Iranian supply. Within a month it will become clear how the reduction in supply will affect prices. This theory will be tested this week with a stop 19 percent of oil production in the Gulf of Mexico region due to the fast approaching hurricane Michael. Hurricane fears will likely affect the price action on Tuesday. At the end of the session, traders will get the opportunity to react to the latest data from the American petroleum Institute. In addition, do not forget about the demand.
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Yevgeny Abramovich
Analyst
Forex broker FXOpen