OPEC raises forecast based on USA oil production

Cornelia Mascio
Settembre 24, 2018

The talk of $100 crude comes just hours after OPEC and its allies rebuffed pressure from US President Donald Trump to immediately boost production to lower oil prices.

Furthermore, the commodity has also rallied in the wake of USA sanctions on Iranian oil exports and fears about OPEC-member depletion rates.

Brent traded as high as $80.43 a barrel in Asia on Monday, within spitting distance of the intraday peak for the year on May 17, and if it closes above $80 it will the first time this has happened since November 2014.

Crude oil prices gapped higher from weekend trading, in response to announcements from delegates of the Organization of the Petroleum Countries and allied governments crossing the newswires.

While Iran is unlikely to see a drop to zero exports, initial assessments by several analysts that about 500,000 barrels per day (bpd) of Iranian oil would be lost appear way too optimistic now.

Major oil trading houses are predicting the return of US$100 crude for the first time since 2014 as OPEC and its allies struggle to compensate for USA sanctions on Iran's exports.

The official further underlined the fact that OPEC's Joint Ministerial Monitoring Committee (JMMC) which set to meet on Sunday in Algiers has no authority to impose a new supply arrangement.

The refusal to immediately increase production combined with a bullish long-term chart pattern is helping to fuel today's rally.

Suhail bin Mohammed Faraj Faris Al Mazrouei, Minister of Energy and Industry, said as the market is right now in "good condition", the Emirate would not overuse its spare production capacity. The Saudi minister said returning to 100 per cent compliance was the main objective and should be achieved in the next two to three months.

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 co-head of oil trading Ben Luckock.

Crude oil price curves are now in backwardation, with front-month contracts more expensive that later-dated futures. Second, increased levels of debt means emerging markets are now in a more fragile starting position than in 2008. "As a result, significant EM oil demand destruction could follow if Brent crude oil spikes above $120/bbl".

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