Oil prices could rise to $100 a barrel by 2019, warn merchants

26 September, 2018, 23:57 | Author: Gerard Cortez
  • Saudi energy minister rips Trump tweet: 'I do not influence oil prices'

Russian Energy Minister Alexander Novak has accused the USA of destabilising the global oil market, urging for wider cooperation between OPEC and non-OPEC producers to reach long-term stability.

In a speech, Mohammad Barkindo, OPEC secretary general, said the organisation would "work hard to ensure a sustainable stability in the global oil market, enabling steady and lasting economic growth across consuming and producing countries". Al-Rumhy said the exact mechanism for doing so had not been discussed.

Traders are calculating exports from Iran, a major producer, may dry up in the coming months.

Most, if not all, of worldwide crude flows are either directly or indirectly linked to Asian demand these days.

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.

Iranian leaders have already threatened to disrupt oil shipments through the Strait of Hormuz, the world's busiest sea route for crude oil exports.

The report says that oil is set to retain the highest share in the global energy mix through to 2040.

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An Iranian tanker and a South Korean (right) tanker docking at the platform of the oil facility in the Khark Island.

OPEC and Russian Federation have capped production since January 2017 to bolster prices.

JPMorgan said USA sanctions on Iran could lead to a loss of 1.5 million barrels per day (bpd), while Mercuria warned that as much as 2 million bpd could be knocked out of the market. 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. At the same time, global oil demand is nearing 100 million barrels per day, a historical high. Iran told OPEC its production had been steady in August at 3.8 million bpd.

Politically unstable Libya also presents a supply risk, industry participants at APPEC said.

The outages from Iran are worse than most analysts expected as buyers remain wary of penalties from sanctions due to take effect from November. WTI is now trading at the top-end of last Friday's daily trading range. Higher gasoline prices for U.S. consumers could create a political headache for Republican Trump before mid-term congressional elections in November.

"We expect that those OPEC countries with available spare capacity, led by Saudi Arabia, will increase output but not completely offset the drop in Iranian barrels", said Edward Bell, commodity analyst at Emirates NBD bank.

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. In her view, the market does not focus enough on how Iran will react.

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