Will There Be a Kurdistan, and What Role Will Russia Play in the Future Oil Market?

On Thursday evening Brent crude is trading not far from the $57/barrel mark amid a number of this week’s indicators and statements from OPEC+ representatives.

We should start with an analysis of US crude oil inventories, which were updated on Wednesday by the International Energy Agency. A day earlier, on Tuesday, preliminary data from the American Petroleum Institute came out, showing no definite trend. Last week the number of active rigs in the United States rose, which probably put the market in a bad mood and caused a long decline in oil, bringing it close to $55/баррель. On Wednesday, however, crude oil inventories were far better than expected – they dropped significantly, which propped up oil, stopping its fall. Despite this good news, it is worth noting that US oil production is again rising, although at not a very significant pace. The deciding factor will be Friday’s statistics from Baker Hughes, which will provide a picture of the number of rigs in the United States in the first week of October.

Worthy of separate mention are statements made during Russian Energy Week, where Russia emphasized the possibility of extending the OPEC+ agreement. Also noteworthy are remarks by the head of the Goldman Sachs oil and gas department, that the RF’s role in meeting the terms of the agreement is fairly high, as is its fulfillment of its obligations. It was also noted that meeting the obligations under the agreement will help preserve backwardation (premiums for future oil contracts), and this is one of the conditions for the oil market’s recovery.

Turkey’s President Erdogan again raised the issue of Iraqi Kurdistan. On Thursday he stated that a decision will be made to cut off oil transit from that region. It is important that it will be a joint Iran-Iraq decision, which raises the problem to a higher level. This is good news for oil, since it creates a temporary oil shortage in a number of areas because oil deliveries will be impossible.

The recovery of the US dollar is having an adverse effect on the gold market: bouncing off $1300, gold is for now clinging to $1275 with no definite trend. The majority of US funds that trade gold are noting a gradual outflow of investments. To be fair, it is worth noting that the outflow in this case is not a flood and averages less than 1% a week.

The majority of investors are awaiting Friday’s unemployment data after Wednesday’s mixed numbers, without making any drastic movements. One way or another, gold’s fate will be decided at the next Fed meeting where the interest rate will probably be raised another 0.25% and the dollar will strengthen even more. In this case gold just might return to the $1200-$1250 price range.

Yuri Prokudin, exclusively for Olymp Trade

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