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Oil prices have been rising back to the top of the range amid growing concerns that Trump’s Iran sanctions will severely curb Iranian crude exports and subsequently hinder the global oil supply. Iran is the world’s fifth-largest oil producer, and the recently imposed sanctions can lead to a significant loss in the global oil supply. In 2006, when the UN Security Council imposed sanctions on Iran, they lost half of their crude oil exports.
The global supply glut has kept oil prices under pressure since late 2014, but after the coordinated reduction in oil output by the OPEC cartel, including 10 other major oil producers, the deal helped push oil prices higher. As we can see, the potential oil supply disruption can have a significant material impact on the crude oil price.
In the short term, the Iranian production lost is already offset by the OPEC cartel, which alongside Russia have signaled their desire to exit early from the cut deal that expires at the end of this year. The move to increase production by up to 1 million barrels per day has already been priced in by the market as the crude oil price has dropped almost 7% since the announcement.
Later, during the NY session, the EIA Crude Oil Stock data will give further clarity to the short term oil price action. According to the market consensus, the crude stocks are expected to fell by -3.36 million barrels versus +3.80 million barrels previous reading.
The technical pattern shows the first level of support at $66.35, while resistance level can be noted the big psychological number $70. However, since August is one of the quietest months of the year in terms of volume we should expect current crude oil trading range to extend.
Source LCG MT$, 8/8/18
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