Quotes from Commerzbank Corporates & Markets:
-Oil prices have yet to bottom out: on a closing price basis, WTI is currently trading at a six-month low, while Brent even finds itself at a nine-month low. The stronger US dollar and weak equity markets are just as much to blame as the currently plentiful supply and relaxed sentiment among market participants with respect to the numerous production risks. News of a possible “oil for food” bartering agreement between Russia and Iran, which could allow the latter to partially evade the West’s sanctions, is also generally helping to keep the market calm.
-We believe that these talks are nothing but a psychological weapon intended to urge the West to make concessions in terms of the sanctions. In purely technical terms, it would be difficult to transport or process crude oil between the two countries, while sanctions would prevent it from being sold on. According to Reuters, Iran once again exported more crude oil in July than sanctions permit – that said, exports have already fallen for the second month running. -According to the US Department of Energy, stocks of crude oil and distillates each declined by 1.8 million barrels last week, while gasoline stocks fell by as much as 4.4 million barrels. Distillate stocks are typically built up in the summer and then decline in the autumn and winter. At around 9.85 million barrels per day, implied gasoline demand has also climbed to its highest level since August 2007. We believe that market participants are overestimating the current level of oversupply on the market while at the same time underestimating the risks of future production outages, and expect oil prices to rise.
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