OPEC raises forecast based on USA oil production

27 September, 2018, 08:33 | Author: Natasha Holloway
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Brent crude futures LCOc1 were at $81.45 per barrel at 0421 GMT, up 25 cents, or 0.3 percent, and close to the intraday peak touched the previous day at $81.48, the highest level since November 2014.

USA crude oil production set a new record over the summer producing 10.8 million barrels per day.

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

"Given the numbers we saw today, that [an output increase in 2019] is highly unlikely unless we have surprises on the supply and demand", Falih said, Reuters reported.

One respected commentator also questioned OPEC's ability to calm the tensions in a market where Iran's oil supplies are collapsing due to U.S. sanctions, with spare capacity dwindling and production unsustainable for many member states.

An oil price spike is starting to look increasingly possible, with a rerun of 2008 not entirely out of the question, according to a new report.

Saudi Arabia signalled the kingdom is in no rush to bring oil prices down from current levels. This time, the deepening trade war between the US and China threatens economic growth in Asia and turmoil in emerging countries could amplify the impact of higher prices on global demand growth.

Representatives from member nations of the Organization of the Petroleum Exporting Countries, and non-OPEC countries such as Russian Federation, gathered in Algeria on Sunday.

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OPEC and major Middle Eastern producers should take the responsibility to increase production when the market needs more crude, said Ali Nazar Faeq al-Shatari, deputy director of Iraq's State Oil Marketing Organization, or SOMO.

However, Saudi Arabia's influential oil minister Khalid al-Falih left the way open to a future production hike, as supplies tighten due to the United States imposing sanctions on Iranian oil from November this year.

Both Dubai physical and paper markets have rallied in recent weeks, with the backwardation structure widening sharply in both cash and swaps timespreads, reflecting Asian end-users' growing concerns about the Iranian supply cutoff after November.

“The market does not have the supply response for a potential disappearance of 2 million barrels a day in the fourth quarter, ” Jaeggi said in a speech at the S&P Global Platts Asia Pacific Petroleum Conference (APPEC) in Singapore.

We could see those OPEC countries with available spare capacity led by Saudi Arabia, to increase production a little, but this should not completely offset the oil lost from the drop in Iranian exports.

Iranian leaders have already threatened to disrupt oil shipments through the Strait of Hormuz, the world's busiest sea route for crude oil exports. A spike to $90 per barrel is likely in the coming months, J.P. Morgan said in its latest market outlook.

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


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