Oil prices are rebounding as Saudi Arabia, as expected, announced it will extend its one million barrels of oil a day production cut into December and most likely beyond, says Phil Flynn of PRICE Futures Group.

Already, they are dropping hints that they will review its decision next month, and the only reason they are not announcing it today most likely is the pressure they are feeling due to the war in Israel. The Saudis also kept their official selling price (OSP) for oil to Asia the same despite rumors that they were going to cut the selling price. That signals that demand in Asia may be stronger than people think. They also kept the selling price to the US unchanged, but they did cut the price to Europe, the soft spot for global demand.

Some are speculating that weak demand in Asia could weigh on crude prices. S&P Global reports that China’s refining margins at the lowest this year may mean a “lower appetite” for crude oil by the world’s largest energy consumer in the next few months at a time when demand in Asia usually peaks, the head of Vitol Asia said November fifth. Yet Jodi reports that global crude inventories fell by 20.5 million barrels in August while product inventories rose by 43 million. China demand concerns as well as concerns surrounding a slowing economy in Europe are weighing on market sentiment. US oil inventories should fall again this week.

Oil also has seen a reduction in war premium as it’s clear that Iran will not be held accountable for its support of the terror attacks in Israel even as Iran warns the US that they will be ‘hit hard” if they don’t stop Israel. Fox News reports that the US has sent a nuclear submarine to the region to act as deterrence. The Wall Street Journal reports that Israeli Military Poised for Battle for Gaza City. Israeli troops were tightening their positions around Gaza City following one of the biggest aerial bombardments of the war and a temporary shutdown of communications in the enclave.

Iran is having no trouble selling its oil and the Biden administration is showing no signs that they will move to cut off funding for Iran’s terror funding. Venezuela will also not be held accountable for not allowing free and fair elections because let’s face it, this administration is desperate as its policies have led to high prices for everything and their poll numbers are plummeting. On Friday last week, crack spreads gave back the gains in recent weeks caused by a spat of hedging.

Now those spreads look poised to come back with inventories this week should again tighten. The market is still trying to determine just how long the world can get away without a disruption of supply. Natural gas is falling back a bit as temperatures seem to be warming just a bit. Still, the fundamental outlook for winter could be very interesting especially if winter is colder than normal. Look to buy breaks.

Learn more about Phil Flynn by visiting Price Futures Group.