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Why Oil Is Falling Despite Geopolitical Tensions

Jayson Derrick

Despite heightened global tensions surrounding the Middle Eastern oil giant Iran, the commodity was trading lower by more than 3%.

US: Iran's Aggression Will Be Countered

The Department of Energy released a statement Wednesday that Iran is trying to destabilize the oil market, OilPrice.com reported.

Secretary of Energy Rick Perry and his Saudi Arabian counterpart Khalid al-Falih reaffirmed their commitment to "ensure that world oil markets remain well supplied" in reaction to Iran's aggression, most recently the seizure of a British tanker in the Straight of Hormuz.

Multiple Headwinds

The global oil market and future demand for the commodity are negatively impacted by multiple political themes, Apple-Metro CEO Zane Tankel told Fox Business News in a TV interview Wednesday.

Some of the macro headwinds include Brexit uncertainty, a slowdown in China's economy and expectations for a recession in the U.S.

"Oil doesn't like uncertainty just like the stock market doesn't like uncertainty," he said.

A surprise 2.4-million barrel build in crude oil inventories reported Wednesday implies a lower oil price based on basic supply and demand.

Technological advancements in the oil sector are also contributing to lower oil prices, he said. The industry is able to produce more oil today with 930 rigs than it was able to produce with 2,000 rigs just three or four years ago, he said. 

'So Much' Oil

Iran is threatening the "mother of all wars" as a result of U.S. sanctions, Fox Business host Stuart Varney told Tankel — and yet the price of oil is tumbling. 

"We have more resources here just in the United States than anywhere in the world," Tankel said.

"The Saudis control the Gulf and basically they are a cartel on the pricing." 

Brent crude was trading down 4.11% at $56.52 at the time of publication Wednesday. 

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