Crude oil prices witnessed a sharp selloff last week, with WTI down 12.57% and Brent down 13.82%.
According to Vijay Valecha, Chief Investment Officer, Century Financial, "Crude prices have fallen following comments by US President Donald Trump that further military strikes on Iran are highly unlikely, assuming progress is made on the nuclear programme and the Strait of Hormuz stays open. Trump had previously indicated that he might be inclined to re-initiate strikes on Iran following the US mid-term elections last week, but there has been absolutely no sign of any large-scale US military action. Iran has said it will respond to any escalation by targeting U.S. and Israeli assets. Oil is clearly heading into a glut as recovering Middle East output, increased production from other countries and weak demand have pushed global supply well above consumption."
A JPMorgan report released on Friday indicated a global surplus of 1.1 m bpd in September, which is set to grow to 1.4 m bpd in October.
On Sunday, Iraq also reached an agreement with the U.S. to allow Iraqi crude to be exported through the Strait of Hormuz via a shipping lane off Oman. That in itself is a very significant development and suggests that prices are likely to remain under pressure in the near term.
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