Oil prices edged lower on Tuesday after U.S. President Donald Trump fired national security adviser John Bolton, who took a strident stance against Iran, raising speculation of a return of Iranian crude exports to the market.
Saudi Arabia’s new energy minister’s assurances of continued output cuts by the Organization of the Petroleum Exporting Countries and its allies, however, supported the market.
Brent LCOc1 settled at $62.38 a barrel, shedding 21 cents, while U.S. West Texas Intermediate (WTI) futures CLc1 finished 45 cents, or 0.8%, lower at $57.40 a barrel.
Oil prices inched higher in post-settlement trade after industry data showed a much larger-than-expected fall in U.S. crude inventories. [EIA/S]
U.S. crude stocks fell 7.2 million barrels last week, more than analysts’ expectations for 2.7 million-barrel draw, data from industry group the American Petroleum Institute showed. Official figures will be released on Wednesday.
Trump abruptly fired Bolton amid disagreements over how to handle foreign policy challenges such as North Korea, Iran, Afghanistan and Russia.
“The market took that as a sign that the Trump administration may become less hawkish on Iran, open the talks and the possibility of the return of Iranian oil,” said Phil Flynn, an analyst at Price Futures Group in Chicago.
Iran’s crude oil exports were slashed by more than 80% due to re-imposed sanctions by the United States after Trump exited last year Iran’s 2015 nuclear deal with world powers. In May, Washington ended sanction waivers given to importers of Iranian oil, aiming to cut Tehran’s exports to zero.
The market was further pressured by the U.S. Energy Information Administration’s (EIA) lowering of its spot crude oil price forecasts, said Bob Yawger, director of energy futures at Mizuho.
In its latest monthly Short Term Energy Outlook, the EIA reduced its forecast for spot West Texas Intermediate crude prices for 2019 to an average of $56.31 per barrel from $57.87 in its August report.
The EIA also reduced its forecast for spot Brent prices for 2019 to an average of $63.39 per barrel from $65.15.
Oil prices were higher earlier in the session after Prince Abdulaziz bin Salman, Saudi Arabia’s new energy minister and a longtime member of the Saudi delegation to OPEC and its allies, said the kingdom’s policy would not change and a global deal to cut oil production by 1.2 million barrels per day would be maintained.
He added that the so-called OPEC+ alliance, which includes non-OPEC producers such as Russia, would be in place for the long term.
The OPEC+ joint ministerial monitoring committee (JMMC), which reports on compliance with the cuts, is due to meet on Thursday in Abu Dhabi.
Goldman Sachs lowered its forecast on 2019 oil demand growth to 1 million bpd, down 100,000 bpd, but left its 2020 demand growth estimate broadly unchanged at 1.4 million bpd.
“Our oil supply-demand outlook for 2020 calls for additional OPEC production cuts to keep inventories near normal,” Goldman analysts wrote in a note.
Additional reporting by Noah Browning, Scott DiSavino and Aaron Sheldrick; Editing by Marguerita Choy and Tom Brown