The oil complex is becoming more and more convinced that the Iranian negotiations will make progress and as such oil prices declined across the board on Tuesday. Further, skepticism that the U.S. politicians in Washington will not be able to come up with a deal weighted on oil.
Oil market participants have moved into a risk-off mode as the geopolitical tensions ease, supply from Libya starts to increase all being offset partially by the ongoing QE program in the U.S. but negatively impacted by the U.S. government shutdown.
With both Russia and Saudi Arabia (two largest oil producers in the world) both producing at very high levels for September, oil seems to be heading for a period of oversupply and thus inventory replenishment as we saw in last night’s API data.
Oil futures markets are trading higher in a modest round of short covering this morning after what was viewed as a bit of a disappointment at the UN yesterday. Rouhani’s speech to the UN was a disappointment as he did not offer anything new.
The overall fundamental picture has not changed this week with oil stocks in the U.S. at the highest level in more than 25 years. Simply put, oil is well supplied with supply still outstripping demand.