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RBC's Croft: Oil May Plunge Amid Unholy Trio of October Factors

RBC's Croft: Oil May Plunge Amid Unholy Trio of October Factors

By    |   Wednesday, 04 October 2017 10:52 AM

A well-respected oil expert warns savvy investors that an unholy trio of factors may combine to make this month scarier than normal for those in the crude patch.

RBC Capital Markets' Helima Croft sees three factors "coming to a head in October," Business Insider reported.

  • Kurdistan region: Residents of the Kurdistan region in Iraq voted in a non-binding referendum on independence. It was "met with harsh rhetorical responses from opponents and is sparking fears of a substantial supply shut in," Business Insider cited Croft as saying.
  • Iranian nuclear deal: President Donald Trump called the Iran deal "one of the worst deals ever negotiated" and repeatedly vowed to rip up the agreement. "President Trump will have the opportunity to make good on his pledge to decertify Iran on October 15, a decision that could set in motion a process that could lead to Congress reinstating the extra-territorial sanctions that prohibited investment in Iran's upstream sector and compelled countries to reduce their Iranian crude imports," Croft said. "Even if Trump has an 11th hour change of heart, new sanctions for non-nuclear transgressions are likely looming and they could deep-six the deal," Business Insider cited Croft as saying.
  • Venezuela: The White House has previously said it could up economic pressure on Maduro's government. "New US sanctions will undoubtedly make it more difficult for the national oil company, PDVSA, to maintain current levels and meet its debt obligations," Business Insider cited Croft as saying.

Croft warns that if oil companies manage to avoid "full-blown crises," they “face considerable turbulence," Business Insider cited Croft as saying.

Oil prices fell on Wednesday, pulled down by caution that rising U.S. crude output could scupper a rally that lasted for most of the third quarter, Reuters reported.

U.S. West Texas Intermediate crude futures were at $50.40 per barrel at 1315 GMT, down 2 cents from their last close. They fell below $50 earlier in the session.

Brent crude futures were down 4 cents at $55.96 a barrel. Earlier in the day, they fell as low as $55.38.

The drop came amid worries that a third-quarter rally that lifted Brent to mid-2015 highs by late September had been overdone. A resumption in output at Libya’s Sharara oilfield added to the concerns.

“Fundamentals may not yet be strong enough to support a continued rally, especially in growth-dependent commodities such as oil,” Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank, said in a quarterly outlook to investors.

The Sharara oilfield restarted on Wednesday. It had been producing more than 230,000 barrels per day (bpd) before armed brigades closed it on Sunday, Reuters reported.

Still, market observers said a so-called rebalancing is well underway, meaning demand is no longer undershooting available supply.

The rebalancing is a result of strong consumption and also efforts led by the Organization of the Petroleum Exporting Countries to cut output by around 1.8 million bpd in 2017 and the first quarter of next year.

On Wednesday OPEC Secretary-General Mohammad Barkindo said he was confident that his organization could restore sustainable stability to markets, while Russian President Vladimir Putin said he did not exclude an extension of the cuts until the end of 2018. Russia is part of the supply agreement.

But rising oil production in the United States, which is not involved in the deal, has prevented prices from climbing further.

“The production growth from non-OPEC countries is still there so I do not expect a price rise in the near future,” Fatih Birol, executive director of the International Energy Agency, told Reuters.

(Newsmax wires services contributed to this report).

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RBC Capital Markets' Helima Croft sees three factors "coming to a head in October," Business Insider reported.
oil, crude, october, rbc, croft
Wednesday, 04 October 2017 10:52 AM
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