Summary:
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Oil drifts lower after beginning brightly
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Prices had gained on Saudi supply concerns
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Brent crude back near $80
As we head into the European close it’s been a bit of a seesaw day for the oil markets, with brent crude first gapping higher after the weekend before, paring those gains and turning negative on the day. The market jumped on the open after escalating tensions surrounding the disappearance of a prominent Saudi journalist caused worries over potential supply disruptions from the kingdom. Saudi Arabia has been under pressure since a critic of Riyadh and a US resident, Jamal Khashoggi, disappeared on 2nd October. As the de facto leader of OPEC, Saudi Arabia holds great sway over global oil production and as such, any serious geopolitical tensions could threaten the supply.
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Oil gapped strongly higher over the weekend with the market reopening more than $1 above Friday’s close. Price has since drifted lower however and closed the gap from 80.55. Source: xStation
Another factor which may be seen as supporting the market is the latest import data from South Korea. The figures show that Seoul didn’t purchase any oil from Iran last month - the first time this has happened in six years. Purchases from Iran are attracting heightened attention at present, with US sanctions against the country set to take effect in early November. An expected drop in Iranian supply was the chief cause of the strong rally seen at the back end of September.
Comments from Trump may have eased the nerves a little, with the US president saying that he has spoken with King Salman about Khashoggi and that he is sending Secretary of State, Mike Pompeo to meet the king immediately. Trump also told reporters he believes "rogue killers" may have been responsible for Khashoggi's disappearance.
Oil has pulled back in recent session but importantly remains above the prior breakout level of 79.75 on a daily closing basis. Intraday price has dipped below here but failed to take out the last candle rule low at 79.07 from the day of the breakout. Source: xStation
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