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  • Oil rallies, supported by Mid-East supply challenges amid geopolitical tensions.
  • US-China trade developments and US weekly Crude Stocks data in focus.

WTI (oil futures on NYMEX) is seen extending its recovery into a third straight session, having caught a fresh bid wave last hours, as the bulls cheer the rising risks of supply disruption from major Mid-East oil exporters.

Supply challenges from Iraq, the OPEC’s no. 2 oil producer, emerged following deadly anti-government unrest. Ayham Kamel, Eurasia Group’s practice head for the Middle East and North Africa, said: “Iraq’s oil exports of 3.43 million barrels per day (bpd) from Basra terminals could be disrupted if instability lasts for weeks”, as cited by Reuters.

Further, Libya’s National Oil Corporation (NOC) said over the weekend that it would shut down the Faregh oil field at Zueitina port for scheduled maintenance from Monday until Oct. 14.

However, the rallies in the black gold appear short-lived, in the wake of the recent US-China pessimism that tempers the appetite for higher-yielding assets such as oil. On Sunday, Bloomberg reported some sources, as saying that China wants a narrower trade deal. This came ahead of Thursday’s high-level trade talks in Washington and triggered mild risk-aversion.

Meanwhile, the restoration of the Saudi oil production capacity is also likely to keep the  sentiment  around the barrel of WTI undermined.  Attention now turns towards the US weekly supply reports and fresh updates on the US-China trade front for near-term trading opportunities in oil.

WTI Levels to watch