Oil prices slipped during Thursday’s Asian session, undoing some of the gains made during Wednesday’s New York trading session. The decline was prompted by concerns about demand that relate directly to the trade war between the United States and China. U.S. WTI futures were down 0.65 percent as of 1:05 p.m. HK/SIN to trade at $69.91 per barrel. Brent crude futures were down 0.55 percent to $79.30 per barrel. Brent had risen above $80 per barrel for the first time since May on Wednesday while U.S. WTI traded briefly above $70 per barrel before falling below that key level. The move was prompted by expectations that Washington’s sanctions on Iran will tighten global oil markets.
Despite these fresh concerns, many hedge funds remain bullish on Brent crude CFTC data shows that long position increased after the past two weeks as traders expect further price tightening. In advance of the Iranian sanctions, South Korea stopped its purchases from Iran after purchasing 194,000 barrels in July. South Korea is the third-largest importer of Iranian oil, trailing China and India. Each of those countries usually imports between 500 to 700,000 barrels of Iranian oil per month, a number which may be reduced even though they aren’t expected to completely cut ties with Iran. Saudi Arabia is currently positioning itself to step in and provide oil to those countries that cut ties with Iran.
On Wednesday the U.S. Energy Information Administration (EIA) announced that U.S. crude inventories dropped by 5.3 million barrels last week to 396.2 million barrels, its lowest level since February 2015. Also on Wednesday, OPEC reduced its 2019 forecast for global oil demand citing economic risk as the reason for its downward adjustment. According to Reuters, at least three North Asian refiners have already asked for extra Saudi oil as of October. Saudi Arabia has also reduced prices on its Arab Light grade for October especially for Asian buyers to entice new buyers before the sanctions go into effect.