London — Crude oil futures tested the $82/b mark during European morning trading as bullish sentiment continued to gain momentum, as news of US crude inventory builds was overshadowed by a number of weeks of drawdowns in inventories and looming US sanctions on Iran.
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At 1057 GMT, the November ICE Brent crude futures contract was up 23 cents from Thursday's settle at $81.95/b, while the NYMEX WTI November was down 2 cents at $72.10/b.
Total commercial crude inventories rose 1.85 million barrels to 395.99 million barrels for the week ended 21 September according to the US Energy Information Agency. This comes on the back of a period of steady drawdown in stocks which surprised some investors and was still "keeping bullish tone intact," according to Geordie Wilkes, analyst at Sucden UK.
Wilkes said the market would continue to keep an eye on whether last week's build in inventories was a one-off or whether further drawdowns continue, with demand expected to increase as we move into the winter months.
Recent headlines following the meeting of OPEC and its partners last weekend and looming revival of US sanctions on Iran, which go into force on November 4, continue to spur bullish market sentiment.
"The fact that we've consolidated these gains after reaching $80/b has kept the bullish tone intact. As long as it holds above $80 investors will remain on the front foot," Wilkes said.
Commerzbank analysts Friday said that talk from a number of global banks and traders that oil prices may reach $100/b stems from the sharp fall in Iranian exports that looks likely to result from the imminent US sanctions. Saudi Arabia appears poised to steadily increase production in response to the shortfall in Iranian production.
"Saudi Arabia apparently plans to quietly increase the oil supply in the short term to compensate for the shortfall in Iranian oil. It is reported that a 500,000 b/d increase in production was discussed at last Sunday's OPEC+ meeting," Commerzbank said in a research note.
And concerns over OPEC's reaction to US production ramping up further, appear premature, according to Sucden's Wilkes, as supply bottlenecks at various sites in the US still require further investment.
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