Monday, 12 November, 2018

Oil steadies below four-year highs; US inventory rise expected

The potential supply shortage is a a reversal of the glut seen in the oil market between 2015 to 2017 The potential supply shortage is a a reversal of the glut seen in the oil market between 2015 to 2017
Nellie Chapman | 03 October, 2018, 14:56

Oil edged higher on Thursday, driven by the prospect of a shortfall in global supply once USA sanctions against major crude exporter Iran come into force in five weeks.

Brent crude lost 37 cents to $84.61 per barrel by 1200 GMT on Tuesday after reaching a four-year high of $85.45 in the previous session.

Brent has risen by around 20 percent from the most recent lows in August.

Brent for December settlement increased as much as 54 cents to $83.27 a barrel on the ICE Futures Europe exchange and was at $83.17 at 12:22 p.m.in Singapore. Meanwhile, the 24-year-old North American Free Trade Agreement will now be superseded by the U.S. -Mexico-Canada Agreement, covering a region that trades more than $1 trillion annually.

U.S Energy Secretary Rick Perry has ruled out using USA strategic crude reserves to lower oil prices.

As most of the world will be required by the United States sanctions to no longer buy their oil from Iran, OPEC, whom Iran is a member of, has been struggling to significantly increase its levels of supply.

ANZ bank said on Monday that "the market is eyeing oil prices at 100 dollars per barrel". Consequently, this suggests that China is bowing to pressure from the U.S. to bring purchases down to zero despite previously stating that they would not stop buying Iranian oil.

OPEC is seen having a little or no spare capacity to fill Iran loss.

The standoff between the JMMC, in reality Saudi Arabia, its most powerful member, and oil traders about the state of the oil market is reminiscent of earlier periods of rising prices.

"Already at $80, we are seeing emerging-market local oil prices pretty close to where we peaked a few years ago. the race to protect consumers from further price rises from here could potentially impact demand growth sooner than would otherwise have been expected", Hansen said.

Media reports said that Saudi Arabia would raise oil outputs in the coming months to deal with the drop in Iranian oil production and might limit outputs next year to balance global supply and demand when the USA pumps more quantities of crude. He says, "High oil and natural gas prices will benefit upstream oil and gas exploration companies like ONGC, Oil India and Reliance Industries as higher gas prices will lead to higher earnings, due to improvement in per unit realisations in the natural gas segment".

Iran's seaborne exports in September hit its lowest since mid-2016 of 1.9 million barrels per day (bpd), according to trade data.