Wednesday, 17 October, 2018

Oil hit 4-year high

A partially constructed gas refinery at the South Pars gas field is seen on the northern coast of Persian Gulf in Asalouyeh Iran A partially constructed gas refinery at the South Pars gas field is seen on the northern coast of Persian Gulf in Asalouyeh Iran
Lindsey Cook | 26 September, 2018, 13:47

Commodity traders Trafigura and Mercuria said yesterday that Brent could rise to $90 per barrel by Christmas and pass $100 in early 2019, as markets tighten once United States sanctions against Iran are fully implemented from November.

The back drop: Starting on November 4, the US will target Iran's oil exports with sanctions.

On Sunday, Iranian oil minister Bijan Zanganeh said Trump's tweet "was the biggest insult to Washington's allies in the Middle East".

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".

Bank of America Merrill Lynch has lifted its average Brent price forecast for 2019 from US$75 per barrel to US$80, while it increased its WTI crude oil forecast by US$2 to US$71 per barrel in 2019.

In response to Trump's remarks, Saudi Arabia's oil minister Khalid al Falih told CNBC: "That is of course not true, we have been looking at more important aspects which is adequacy of supply".

The United States will apply sanctions to halt oil exports from Iran, the third-largest producer in the Organization of the Petroleum Exporting Countries (OPEC), starting on November 4.

"Any formal decision on oil output by the producer group, barring an extraordinary meeting, will only take place at the December meeting".

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Fund managers are betting the introduction of sanctions on Iran will result in a shortage of seaborne crude on worldwide markets even while the landlocked US inland market remains plentifully supplied.

Global benchmark Brent reached $81.39/Bbl, its strongest level since November 21, 2014.

He added that while Sonatrach could boost oil production by 200,000 barrels per day, there is no need for an imminent increase in supplies.

UBS, which revised its 12-month forecast for Brent to $85 per barrel in June, said it "would not rule out a spike in oil prices to the $100 per barrel mark" over the coming year, if further supply disruptions materialised.

Ashley Kelty, oil analyst at financial services firm Cantor Fitzgerald said crude could soon hit US$90 per barrel.

Oil prices have jumped to the highest level for almost four years after Saudi Arabia and Russian Federation ruled out any immediate increase in production.

However, the consensus has now moved to as much as 1.5 million barrels daily as the U.S.is "incredibly serious" about its measures, he said. Rapid growth in USA production means that oil stockpiles could expand again next year, but it's too early to say whether the production limits agreed in 2016 would need to remain in place, he said.

Iran says no country can ever compensate for its missing oil supplies to markets in case the US materializes its threat to bring the Islamic Republic's oil exports to zero with a top official saying that US President Donald Trump would sooner or later have a change of heart over his campaign to the same effect.

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