It has not been easy for Crude oil traders for the past month as uncertainty reigned after a series of news and events that took place. Tightening global supply has led oil prices to rise close to $70 per barrel since US sanctions squeezed Iranian crude exports despite efforts by Washington to get other producers to increase output. Washington’s request to South Korea, Japan and India to reduce imports of Iranian oil appear to be taking effect. But at the same time, the US government does not want to push oil prices higher as well as it would depress economic activity or even trigger a slowdown in global growth.
U.S. Energy Secretary Rick Perry met Saudi Energy Minister Khalid Al-Falih on Monday in Washington, as the Trump administration encourages big oil-producing countries to keep output high. A group of OPEC and non-OPEC producers have been voluntarily withholding supply since January 2017 to tighten markets. Since then Crude prices have rallied by more than 40% and markets now look significantly tighter, so recently there has been pressure on producers to start raising output again.
As a coincidence, an attack on the headquarters of Libya's National Oil Corporation (NOC) in the capital Tripoli on Monday also provided an upwards push to oil prices despite NOC continued to function normally.Furthermore, the TASS news agency reported that Russia and a group of producers around the Middle East that dominate OPEC may sign a new long-term cooperation agreement at the beginning of December without providing any details.
As Middle East markets tighten, Asian buyers are seeking alternative supplies, with South Korean and Japanese imports of US Crude hitting a record in September. On top of that, US oil producers are seeking new buyers for the crude they used to sell to China before orders slowed due to the elevated trade war tension. The given data so far does not provide a clear direction for Crude oil prices in the longer term. However, in the short term the tightening market and continued uncertainty will continue to keep prices elevated with Oil having strong support around the $67 and $64 areas. To the upside, the $70 level is the barrier to focus on. In the longer term, and if supply becomes ever more squeezed, then a move higher has the potential to drive Oil towards the $75 July highs.