More geopolitical turmoil
On October 20, Saudi Arabia admitted that US resident Jamal Khashoggi died during his visit to the Saudi consulate in Istanbul on October 2. The tension between the Western world and Riyadh might escalate. Previously, Saudi Arabia denied its involvement in the journalist’s disappearance.
Possible US sanctions or action toward Saudi Arabia might cause oil prices to increase. In 2017, Saudi Arabia’s oil production accounted for 13% of the world’s total oil production. In 2016, Saudi Arabia’s crude oil and petroleum product exports were the highest in the world. Saudi Arabia will likely be a more significant player in the oil market amid US sanctions on Iran. The sanctions will be effective in early November. At ~7:36 AM EST on October 22, US crude oil December futures were just 2 cents higher from the last closing level. However, oil demand growth concerns might cap the upside in US crude oil prices beyond the psychologically important level of $70 in absence of any US action on Saudi Arabia.
President Trump announced that he would pull out of the Intermediate-Range Nuclear Forces Treaty signed by the US and Russia in 1987 following Moscow’s violation. As a result, there could be more tension between Russia and the US.
US crude oil and important price points
On October 12–19, US crude oil December futures fell 2.7% and closed at $69.28 per barrel on October 19. Bearish inventory data and oil demand growth concerns might have pulled oil prices in the last week.
US crude oil prices’ 50-day moving average of $70.09 is the immediate resistance zone. The closing level of $70.98 on the upside would be important for US crude oil prices until October 26.
A fall in oil prices could be a concern for oil-weighted stocks. Occidental Petroleum (OXY), Denbury Resources (DNR), and California Resources (CRC), the weakest among the oil-weighted stocks, fell 6.2%, 8%, and 10.7%, respectively, last week.