Oil rally faces tidal wave of supply

(Reuters) – The two-year-old oil market is one of the biggest markets in the world.

After $ 75 and $ 85 in barrel just a month ago, both U.S. crude and Brent benchmark futures have been grappled with near-relentless selling. For a time, we had sanctions on Iran sanctions would have barrels off the market.

That changed in the last week. The world's three largest producers – Russia, Saudi Arabia and the United States – all indicated they were pumping at record or near-record levels, while the United States said it would be possible to allow them to import Iranian oil, lessening the threat of a supply crunch.

Those factors, along with a spate of recent weaknesses in the economy, have shifted the conversation back to worries about oversupply, and pushed US futures to fail, since they have consistently found support. during the rally modest pullbacks.

The structure of the U.S. crude futures futures is expected to be more important than expected.

"The magnitude of recent selling has been strongly predicted, especially between the U.S. and China," said Jim Ritterbusch, president of Ritterbusch & Associates.

There has been an exodus among speculators as well. In the last two weeks, net bullish bets on oil. West Texas Intermediate (Sitting greatly accelerated on Thursday after U.S.WTI) lower futures fell below $ 65 a barrel,

The oil market rises in anticipation of this week's re-imposition of sanctions against Iran by the United States, and it is concerned that the supply of producers in Saudi Arabia would not be able to make up the difference.

(Russian, U.S. & Saudi crude oil production: tmsnrt.rs/2CTwqaq)

However, the U.S. government said on Friday it will be time to continue to import Iranian oil when U.S. sanctions come back into force on Monday, sparing them for the threat of U.S. economic penalties.

Still, some analysts believe the current selloff has come too far, too quickly. Major OPEC producers would be needed, especially in Iran, Venezuela and Libya still at risk.

"A loss of 1 million bpd from Iran, further declines in Venezuela, coupled with geopolitical disruption in Libya and Nigeria could easily wipe out what little spare capacity we have left," Bernstein analysts said this week.

Output from the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, rose to levels not seen in two years. U.S. production hit record 11.3 million barrels a day in August, and Russia's output rose to 11.4 million bpd, a post-Soviet era peak.

For U.S. crude, the key area to be between $ 64.45 and $ 64.80, said Fawad Razaqzada, Forex.com analyst at futures brokerage. If it dips below this point, "the path of least resistance would be downside," he said.

For Brent, Razaqzada is looking at the range between $ 69.50 and $ 69.60 a barrel, and if it was less, he said.