OPEC raises forecast based on US oil production

26 September, 2018, 13:51 | Author: Shannon Aguilar
  • Crude prices are spiking

Commodity traders Trafigura and Mercuria said on Monday that Brent could rise to $90 per barrel by Christmas and pass $100 in early 2019, as markets tighten once USA sanctions against Iran are fully implemented from November. But there is no clear consensus over how the cartel and its allies should contain prices once US sanctions on Iranian oil sales start to bite production in early November.

When Trump in May announced plans to reimpose sanctions on Iran's oil exports, the market estimated a cut of about 300,000 to 700,000 barrels a day, said Trafigura Group Cohead of Oil Trading Ben Luckock.

The United States will target Iran's oil exports with sanctions from November 4, with Washington applying pressure on governments and companies around the world to fall into line and cut their purchases.

Some of these producers have visited Japan and "told us if you need more crude oil, we can supply", said Cosmo Oil's director of supply Masashi Nakayama.

OPEC and non-OPEC, including Russian Federation, gathered in Algiers on Sunday for a meeting that ended with no recommendations for any additional supply boost to counter falling supply from Iran.

In a statement on its website, the cartel said it was satisfied "regarding the current oil-market outlook, with an overall healthy balance between supply and demand".

When asked about Trump's repeated accusation (most of them delivered via Twitter) that OPEC was pushing crude prices higher, al Falih replied, "That is of course not true; we have been looking at more important aspects, which is adequacy of supply".

Oil prices were at their highest levels since 2014 in trading Monday, after the Organization of Petroleum Exporting Countries decided not to raise output.

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But according to the newspaper, the kingdom's state-run oil giant Saudi Arabian Oil Co., known as Aramco, doesn't have the capacity to meet future demand if Iran is no longer delivering oil.

Oil benchmark Brent rose for a second day on Tuesday, remaining within range of a four-year high reached during the previous session.

"I think what they are doing actually is (leading to) higher prices because the fundamentals even do not warrant this level of prices", Kazempour said.

Notably, the bank increased its estimate of supply losses from Iran 1 million barrels per day (mb/d), up from 500,000 bpd previously.

For months, Saudi Arabia had led investors to believe that it was comfortable with Brent crude oil at about $80 per barrel. Thus, prices are unlikely to rise as fast as and as high as they did in 2007/08 when the USA dollar weakened in response to Fed rates cuts.

Earlier, oil prices had surged on worries about global supply after USA sanctions on Iran's oil exports take effect November 4.

"Fears that supply will be hit when the U.S. sanctions on Iran kick in come November are pushing up oil prices".

The market was "increasingly concerned about dwindling (U.S.) inventories", ANZ bank said on Monday.

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