27 September 2018 : Oil prices rose by almost 1% on Thursday, fueled by the likelihood of a shortfall in global supply when U.S. sanctions against Iran come into play in five weeks’ time.
Earlier this week U.S. President Trump demanded that OPEC needs to surge its raise production to prevent any further price increases. Although it is highly unlikely that any of the OPEC countries or partner Russia would react to Trump’s demands. Moreover U.S energy secretary Rick Perry has denied the usage of U.S. strategic crude reserves as a means of lowering the price.
The most-active December Brent crude futures contract LCOv1 went up by 59 cents at $81.38 per barrel at 0921 GMT, just off Tuesday’s four-year high of $82.55.
The front-month November contract expires on Friday.
U.S futures CLc1 were up 36 cents at $71.93 per barrel.
Looks like the higher price trend is hear to stay, and will carry on into next week and further out, while Brent is highly unlikely to reach $100 per barrel, we see material risks of this coming to fruition
The biggest sufferer of this price increase will be the Emerging markets, as at $80, their local oil prices are almost reaching their pinnacle from a few years back. The need to shield consumers from any further price increase could most likely impact demand growth sooner than would otherwise have been expected.
For now its difficult to guesstimate as to how much Iranian crude could disappear from the market once U.S. sanctions come into force, as it could be anywhere from 500,000 barrels per day (bpd) skyrocketing up to 2 million bpd.
In May’18, Crude exporter giant Iran exported as high as 2.71 million bpd of crude oil which is equal to nearly 3 % of daily global consumption. Saudi Arabia stepped up to donate additional oil to the market over the next few months to counter the drop in Iranian production but as US starts to pump more crude, Saudi will need to limit its output next year to balance global supply and demand.
OPEC has very little spare capacity to make up for any drop in exports from Iran, which is the group’s third-largest producer.
U.S. crude production C-OUT-T-EIA hit a record 11.1 million bpd in the week ending Sept. 21, according to data from the Energy Information Administration (EIA) on Wednesday.
That is an increase of almost a third since mid-2016.
Commercial crude stocks C-STK-T-EIA rose by 1.85 million barrels, to 395.99 million barrels, the EIA data showed.
Source : Reuters London.
Reporting for EasyKobo on Thursday , 27 September 2018 in Lagos, Nigeria