My expectation for the West Texas Intermediate oil price for September is the same as it was for July and August, namely WTI will range between $65 and $75 per barrel. While it might deviate from that range for a few days, I expect that WTI prices will fall within that range for most of the month.
Although oil prices briefly fell below $65 in August, prices remained in the $65 to $75 range. September and October are considered shoulder months where oil demand is reduced because the driving season has passed and the winter heating season still lies ahead. This year, though, the Iran sanctions are making the situation more interesting.
There is still considerable uncertainty as to the timing and the quantity of the affected Iranian barrels. On August 28, the Wall Street Journal article “Iran’s Oil Exports Dropping Faster Than Expected Before U.S. Sanctions” (subscription required) suggested that reduced Iranian exports might have already taken place.
Iran oil shipments are declining at a faster-than-expected pace ahead of U.S. sanctions set to begin in November.
Iran expects crude exports to fall by a third in September, according to people familiar with purchasing plans, potentially posing an unforeseen supply risk to markets. Officials at the state-run National Iranian Oil Co. provisionally expect crude shipments to drop to about 1.5 million barrels a day next month, down from about 2.3 million barrels a day in June, say people familiar with the country’s ports loading program.
Many experts had expected oil shipments to decline by about 1 million barrels by year’s end. Now some of them say that fall may have already happened. Iran hasn’t yet announced its exports this month or its forecast for next month.
Furthermore, on August 29, the Wall Street Journal article “Oil Hits Four-Week High as U.S. Crude Inventories Fall” mentioned that Iranian production is projected to decrease by about 800 thousand barrels per day in September compared to June.
Wednesday’s price surge comes as oil market observers expect prices to remain buoyed in the coming months as the U.S. hits Iran with planned sanctions designed to prevent the country from exporting crude. The ban on Iranian oil exports officially starts in November, but signs are emerging that shipments are already being curtailed.
Officials at the state-run National Iranian Oil Co. provisionally expect crude shipments to drop to around 1.5 million barrels a day in September, down from around 2.3 million barrels a day in June, according to people familiar with the matter.
My outlook for September is the same as it was for August. I am still waiting to see how trade tensions play out over the fall, how Venezuela manages in the months ahead, and how oil markets react to Iran sanctions in November. I continue to expect substantial oil price uncertainty for the next several months.