Monday, 22 October, 2018

OPEC, allies agree not to further increase oil production

Kenneth Drake | 24 September, 2018, 20:53

Major oil trading houses are predicting the return of $100 crude for the first time since 2014 as the market braces for the loss of Iranian supplies because of USA sanctions.

Also Sunday, OPEC released its World Oil Outlook 2040 report.

Under pressure from Trump, OPEC and allies agreed in June to boost production, after months of undersupply by OPEC countries including Venezuela and Angola and the prospect of the Iran sanctions. Trafigura co-head of oil trading Ben Luckock said at APPEC that he sees US$90 oil by Christmas and US$100 in early 2019. With upside momentum picking up, we expect to hear more criticism from President Trump, but other than some light profit-taking, his comments are not likely to have much of an effect on the price action.

The OPEC cartel in December 2016 concluded an agreement with non-member states - including Russian Federation - to reduce output in order to arrest sliding prices.

Kazempour Ardebili said the unfavorable conditions for the implementation of US oil sanctions against Iran could eventually forced US President Trump to show a certain level of flexibility.

Brent crude, the benchmark for more than half the world's oil, rose 2.5 per cent to US$80.56 a barrel at 11:40 a.m.in London, after earlier jumping to the highest level since November 2014.


It also steeply raised US oil output growth estimates to 2023, predicting OPEC would lose further market share.

"I do not influence prices", Saudi Energy Minister Khalid al-Falih told reporters in Algiers ahead of a meeting of OPEC and non-OPEC energy ministers.

Trump has repeatedly called for a hike in production by countries other than Iran to reduce oil prices, which have partially recovered since the December 2016 agreement, to trade close to $80 per barrel this month. "We in Saudi Arabia have not seen demand for any additional barrel that we did not produce".

Indian Oil Corporation declined 1 percent, Bharat Petroleum Corporation 1.6 percent and Hindustan Petroleum Corporation fell 2 percent in an intraday trade.

In addition to USA sanctions cutting Iranian supply, the world is also dealing with a decline in Venezuelan oil production due to an economic crisis in the Latin American nation, according to Trafigura's Luckock. Money managers' wagers on higher Brent crude prices are having their longest streak since November 2017, according to ICE Futures Europe data.

"All this will potentially reflect on oil prices". The biggest source of new global supply, US shale, is also experiencing growing pains as pipeline bottlenecks and workforce issues may hamper growth, he said.

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