Published: Sun, September 23, 2018
Markets | By Josh Butler

US OIL re-testing 50 MA. Trump's tweet in play?

US OIL re-testing 50 MA. Trump's tweet in play?

U.S. President Donald Trump on Thursday issued a fresh call for Organization of the Petroleum Exporting Countries (OPEC) to lower crude prices, saying the United States was providing Middle Eastern energy giants with security and hence in turn these countries should provide relief.

"We're stuck in a range here", said Tariq Zahir, managing member at Tyche Capital Advisors in NY, with prices supported by the USA sanctions on Iranian supplies and pressured by the potential that Chinese demand could wane.

Oil prices have increased from about $50 a barrel last September to more than $70 a barrel today, with a rebalancing of supply and demand in the market as well as major weather and geopolitical events playing a part.

That figure has now nearly doubled in the last six years, though there was a dip between 2014 and early 2016 when the price of crude plunged and oil companies were forced to scale back operations. Meanwhile, an industry report Tuesday showed USA crude stockpiles increased 1.25 million barrels last week, defying expectations for a decline ahead of government data.

Investors grappled with the Organization of the Petroleum Exporting Countries and non-OPEC producers' ability to offset a shortfall from Iran due to USA sanctions that go into full force November 4.

Two of OPEC's founding members, Iran and Venezuela, are under sanctions from Washington.

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Crude inventories fell by 2.1 million barrels, compared with expectations for a decrease of 2.7 million barrels. Gasoline inventories fell by more than 1.7M barrels last week.

Trump has consistently complained that oil prices are too high, following a significant uptick in prices which has been passed on at the pump to United States drivers.

US sanctions affecting Iran's oil exports come into force on November 4 and many buyers have already scaled back Iranian purchases.

OPEC kingpin Saudi Arabia is caught between a rock and a hard place, seeking to prevent prices from rising far above $80 a barrel ahead of the congressional elections while fending off doubts over its ability to compensate for a drop in Iranian supply.

"Whether or not this (price) development was justified, it is a supply-side development and the market has reacted to it", PVM Oil Associates strategist Tamas Varga said, Reuters reported. This gain happened after the news was released that Saudi Arabia, the world's number one oil exporter, announced that it was fine with oil prices being above $80 per barrel.

Here is a look at how share prices for two blue-chip stocks and two exchange-traded funds reacted to this latest report.

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