Oil prices are trading significantly lower after yesterday’s rout, during which crude prices went crashing through the $65 price threshold, closing the day at $63.69, the lowest level since April. Today, crude oil is trading at $63.14, down 55 cents.
Fuel prices took a big hit yesterday. Gasoline prices gave up 5 cents, while diesel prices shed a heavy 6 cents. This morning, diesel prices are trading at $2.1812, down 2 cents from yesterday’s close. Gasoline prices are trading at $1.7067, down 1 cent.
With Iran sanctions approaching in a few days, why are prices falling? For starters, reports came out alleging the Trump administration will grant waivers to India and South Korea, allowing them to maintain over 60% of their Iranian imports. While markets did expect waivers for both countries, the concrete numbers are causing a bit of bearishness.
October production numbers also suggest OPEC’s production reached a two-year high. After waffling over whether they will or will not continue increasing output in response to the Iranian outage, the increase suggests there is enough capacity to meet the outage. However, only 700 kbpd of Iranian production are offline today, and experts believe that number could swell to as much as 2.0 MMbpd of oil – almost 3 times the outage.
On the demand side, Trump tweeted yesterday that he’s engaged in discussions with Chinese leader Xi Jinping, and that the conversation has been favorable so far. With midterm elections coming in just a few short days, don’t expect any big changes in Trump’s hardline stance on China, which tends to play well with his base. After the mid-terms, though, anything goes – a Republican victory would strengthen Trump and affirm his agenda. A strong Democratic turnout would weaken Trump’s mandate and could force him to moderate his foreign policy, at least a bit.