Demand supply equation hurting intermediary WTI bull sentiments again

With this week's crude inventory to miss forecasts (8.0m versus forecasts at 3.5m) as a result, last week's $50.13 per barrel (WTI reached its highest price in nearly three months) has been unable to hold these gains. Profit-taking caused gains to melt away in the later course of yesterday's trading.

Oil prices dropped 3 week's lows after the U.S. EIA reports on crude inventories more than doubling analyst expectations for a crude-stock rise of 3.9 million barrels.

Although oil futures regained the strength but gains were hindered as oversupply concerns remained a factor for oil markets.

According to the CFTC's statistics, net long positions held by money managers climbed by 23,000 to 173,500 contracts in the week to 6 October, which is their steepest rise since April and their highest level in three months.

But for now, the underlying reasoning being supply glut for oil prices are broadly unchanged from last week as market participants awaited three key decisions from different branches of the US government.

We observed the WTI prices reacted somewhat positively immediately following the Fed decision to maintain rates, they remained range-bound over the rest of the day.

Closer to oil markets were the decisions by the U.S. Congress on crude export ban. Separately, the U.S. House of Representatives Energy and Commerce Committee approved a bill to abolish the U.S. crude oil export ban. This might have added little strength for the commodity in the recent gains.

We expect that financial sanctions on Iran would be lifted in early 2016, resulting in higher Iranian crude production. As we have previously noted, however, we expect Iranian production to increase next year following the removal of the financial sanctions.