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Mixed Results For Oil

May 29, 2018 at 13:58 by Matt Jackson

WTI and Brent crude oil prices diverged in early trading on Tuesday. Supply concerns and subsequent OPEC talks about increasing supply have been the primary driving force behind prices recently, but West Texas Intermediate has fallen more than Brent, and this trend has continued today with WTI losing ground while Brent has made up some ground.

US sanctions primarily targeting Iran and Venezuela have weighed heavily on investors’ minds, and there has been a substantial feeling that oil supply will suffer. European companies have been told by US President, Donald Trump, that they could face sanctions if they continue to deal with Iran following the USA’s decision to withdraw from the Iranian nuclear deal, unless they have a waiver from Trump’s administration. Venezuela recently saw President Nicolas Maduro reelected, but world and opposition leaders have accused the administration of buying votes. While European leaders are attempting to salvage aspects of the Iran deal, the opposite is true with Venezuela as a host of countries, including France and the UK, have come out and openly criticized the leader and threatened economic sanctions of their own.

In total, Iran and Venezuela supply around 7 million barrels of oil a day, which is less than 10% of global supply, but still a significant amount of the commodity. The market is afraid that losing this amount will mean that supply will be heavily restricted.

As a result of supply fears, it has been widely rumored that OPEC and Russia will agree to cut back on their supply restrictions in order to ease this supply pressure. They are due to meet on June 22, and a decision is likely to be made then. However, if prices are indicative of market sentiment, it seems that the majority of investors are expecting major oil producers to ramp up their supply levels.

Unusually, while WTI crude prices have dropped 1.09% to $67.14, Brent crude prices have actually increased by 1.02% to $76.09 at 14:30 GMT.

If you have any questions and comments on the commodities today, use the form below to reply.

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