Oil falls 4% in five days from record US crude production ahead of US election, Fed finds; Brent settles at $73/bbl

International crude oil prices rose last session on reports that Iran was preparing a retaliatory attack from Iraq on Israel in the coming days. Still, record U.S. crude production depressed oil prices ahead of the U.S. election and the U.S. Federal Reserve ruling in the coming week.

Brent futures rose 29 cents, or 0.4 percent, to settle at $73.10 a barrel. U.S. West Texas Intermediate (WTI) crude gained 23 cents, or 0.3 percent, to settle at $69.49. Both benchmarks rose more than $2 per barrel at their session highs. Brent reported a weekly decline of around four percent, while WTI fell around three percent. At home, crude oil futures were last down 2.71 percent ₹5,981 per barrel on the multi-commodity exchange (MCX).

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What weighs on crude oil prices?

-On Thursday, the American news website Axios reported that Israeli intelligence suggests that Iran is preparing to attack Israel from Iraq within days. Any additional responses from Iran could remain restrained, similar to Israel’s limited attack last weekend, and therefore intended primarily as a show of strength rather than an invitation to open war.

-Iran and Israel have been involved in a series of tit-for-tat attacks within the broader Middle East warfare sparked by the fighting in Gaza. According to the Reuters news agency, previous Iranian airstrikes on Israel on October 1, 2024 and in April were largely repulsed, with only minor damage.

-Iran is a member of the Organization of the Petroleum Exporting Countries (OPEC) and produced about four million barrels of oil per day (bpd) in 2023, according to data from the US Energy Information Administration (EIA).

-According to analysts and US government reports, Iran was on track to export about 1.5 million barrels per day in 2024, compared to an estimated 1.4 million barrels per day in 2023. Iran supports several groups currently fighting Israel , including Hezbollah in Lebanon and Hamas in Gaza and the Houthis in Yemen.

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-A US official asked Lebanon to declare a unilateral ceasefire with Israel to revive stalled talks to end Israeli-Hezbollah hostilities, a top Lebanese political figure said source and a senior diplomat – a claim denied by both sides.

-Oil prices were also supported by expectations that OPEC could delay its planned oil production increase in December by a month or more due to concerns about weak oil demand and rising supply. A decision could be made as soon as next week. OPEC includes OPEC and its allies such as Russia and Kazakhstan.

-As OPEC cuts production, US oil giant Exxon Mobil said its global production hit a record high, while Chevron said US production hit a record high. The EIA noted that drillers extracted a record 13.5 million barrels of oil per day. EIA noted that production reached a record 13.4 million barrels per day in August and that annual production was on track to reach 13.2 million barrels per day in 2024 and 13.5 million barrels per day in 2025.

-U.S. job growth came to a near standstill in October as labor strikes in the aerospace industry depressed manufacturing employment. Hurricanes also impacted the payroll survey response, making it difficult to get a clear picture of the labor market ahead of next week’s presidential election.

Also read: US payroll data shows a 12,000 job addition in October, with hiring at slowest pace since 2020

-National and statewide polls in the US show that the US presidential race is a battle between Democratic Vice President Kamala Harris or Republican former President Donald Trump as the country’s next president.

-Economists expect the US Federal Reserve to cut interest rates by 25 basis points next Thursday. After aggressively raising rates in 2022 and 2023 to curb the rise in inflation, the Fed began cutting rates in September. Lower interest rates lower financing costs, boosting economic growth and oil demand.