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Oil prices in wait and see mode, as Nov 4 sanctions deadline looms

Oil prices fell more than 1% on Tuesday on signs of rising supply and concerns about global economic growth and fuel demand. Brent crude oil was down $1.65 a barrel, or 2.1% to trade at $75.69 while U.S. light crude (WTI) dropped 95 cents or 1.4% to $66.09.

CNBC said oil prices climbed for the first time in three days on Wednesday. Brent crude futures had gained 47 cents, or 0.6% to $76.38 a barrel while WTI advanced 16 cents, or 0.2%, to $66.34 a barrel.

Both contracts have fallen about $10 a barrel from four-year highs reached in the first week of October. Despite this month’s volatility, oil prices are still up 9.5% for the year, according to the Wall Street Journal (WSJ).

Related: Oil futures panic sell offs, plunging financial markets, quiet bulls

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What is weighing on prices?

Iran sanctions

According to India, China, and Turkey are still buying Iranian oil, just days before U.S. sanctions on Iran go into effect.

Reuters reports that there is tension within the Trump administration over how hard to press these countries that continue to deal with Iran, with some pushing for zero tolerance, and others more in favor of offering some waivers.

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Saudi Arabia and Russia have quieted concerns by promising to cover supply shortfalls. “I expect investors will take a wait-and-see stance this week before the return of sanctions on Iran and U.S. midterm elections,” Makiko Tsugata, a senior analyst at Mizuho Securities Co., told Bloomberg.

Even though Iran is set to lose a significant portion of its exports, he adds that “if both Saudi Arabia and Russia boost output and U.S. production continues to rise, we could have a supply glut.”

WSJ said that some investors say the selling this month was driven more by momentum than supply-demand fundamentals, so crude prices could quickly jump higher if U.S. sanctions against Iran and other disruptions lead to a supply shortfall.

Bearish Hedge funds

Hedge funds and other money managers continued to liquidate their bullish positions on crude oil futures, said

This is a sign that investors are increasingly pessimistic about the trajectory for oil prices. The ratio of long to short positions fell to 6:1, down from 12:1 at the end of September, according to Reuters.

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According to WSJ, Hedge funds have scaled back their bets on rising oil prices to the lowest level in a year.

Bullish bets on U.S. crude outnumbered bearish ones by 4-to-1, Commodity Futures Trading Commission data as of Oct. 23 show.

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Global economy

Crude oil posted steep losses over the past two weeks, the result of growing concerns about the health of the global economy, said

Other commodities, including copper, have also seen volatility.

“It is often said that when stock markets sneeze, commodities catch a cold. This adage was on full display last week as a global rout on equity gauges dragged the energy complex lower,” PVM Oil Associates strategist Stephen Brennock said to Reuters.

US inventories, crude supply

In a bearish signal, the American Petroleum Institute reported U.S. crude inventories rose 5.7 million barrels last week, more than analyst forecasts for a 4.1 million-barrel build, according to CNBC.

Oil production from Russia, the US, and Saudi reached 33 million barrels per day (bpd) for the first time in September, Refinitiv Eikon data showed.

That is an increase of 10 million bpd since the start of the decade and means the three producers alone now meet a third of global crude demand.