An unexpected drop in Saudi crude production lifted oil prices on Monday

Recap: An unexpected drop in Saudi crude production lifted oil prices on Monday, taking prices to their highest level in four days. October Brent pushed passed $74.07, the 10-day moving average, to a high of $74.47 a barrel, while September WTI blew passed its 10-day moving average of $68.80, falling 8 cents short of $70.00 a barrel. Gains were pared, with October Brent settling at $73.75 a barrel, up 54 cents, or 0.7%, while September WTI settled at $69.01, up 52 cents, or 0.8%. This was the highest settlement for a spot WTI contract since June 29.

September RBOB rose less than 0.1% to settle at $2.0651 a gallon, while September heating oil added 0.6% to $2.139 a gallon.

Fundamental News: Saudi Minister of Energy, Industry and Mineral Resource, Khalid al-Falih, said Saudi Arabia will resume shipments from the Strait of Bab el-Mandeb after confirmation by the Joint Forces of the Coalition that security is restored. 

Iraq’s Oil Minister, Jabar al-Luaibi, said oil prices are approaching stability.  He said Iraq plans to raise oil production to more than 7.5 million bpd by 2023-2024, including 6 million bpd of oil for exports and 1.5 million bpd for domestic consumption.     

Goldman Sachs stated that oil demand will continue to remain strong, supply constraints are emerging and added that we are going into a very, very tight oil market.  It said OPEC is quickly going through its spare capacity. 

The Trump administration will aggressively enforce economic sanctions that it is re-imposing on Iran this week and expects measures to have a significant impact on the Iranian economy.  The so-called snapback sanctions would target Iran’s purchases of US dollars, metals trading and other dealings, coal, industrial-related software and its auto sector.  The renewed sanctions are part of the broader strategy under Trump aimed at cutting off the Iranian leadership’s access to resources.  Officials said the sanctions are aimed at modifying Iran’s behavior not bring about a regime change targeting President Hassan Rouhani.  Meanwhile, the European Union voiced regret on Monday.  One EU measure to mitigate the impact of US sanctions, known as the blocking statute, will come into force on Tuesday.

A senior US administration official said the US wants as many countries as possible to cut their imports of Iranian oil to zero. 

Iran’s President, Hassan Rouhani, said Iran could hold talks with the US only if the US proved its trustworthiness after it exited a nuclear deal and reimposed sanctions on Iran.  He said the US will regret imposing sanctions on Iran.  He said the US must prove it is willing to resolve problems through talks. 

Russia’s Rosneft said it has the capacity for another modest production increase this quarter, a move that could lift the country’s output to a new post-Soviet record.  Rosneft has already increased production by about 120,000 bpd and could add another 80,000 tons this quarter. 

A 24-hour strike at three of Total’s British offshore oil and gas platforms, the Alwyn, Elgin and Dunbar platforms, started on Monday morning, as planned.  The three fields’ oil production contributes about 45,000 to 50,000 bpd to the Forties and Brent Blend crude oil streams.  Unite’s regional officer Wullie Wallace said talks were planned for Thursday between its members and Total to discuss pay and new rota scheme. 

Early Market Call - as of 7:30 AM EDT

WTI - Sep $69.67, up 66 cents

RBOB - Sep $2.0952, up 3.01 cents

HO - Sep $2.1729, up 3.34 cents