Saturday, 20 October, 2018

Strong dollar and rising United States supply curb rally in crude oil

Paul Lawry  Flickr Paul Lawry Flickr
Nellie Chapman | 07 October, 2018, 12:28

"One of the things I think that's important, whether it's for Iraq or India or anyone else - particularly that's been a purchaser of Iranian oil - we've gone to really extra lengths to try and find substitute sellers of oil so that there would be alternative supplies at market rates", Bolton said.

US President Donald Trump has pledged to squeeze Iran's oil exports down to a trickle, pushing oil prices to levels not seen since 2014. Currently, most OPEC producers are pumping at, or close to, full capacity, with only Saudi Arabia able to increase output significantly.

U.S. West Texas Intermediate (WTI) crude futures were up 41 cents, or 0.6 per cent, at $77.74 a barrel.

Oil traders have piled into wagers that USA crude oil could surge to $100 a barrel by next year, a milestone that until recently many considered unthinkable due to record US production growth and relatively flat global demand.

This was engineered by worries over a slump in world supply as U.S. sanctions whittle away at Iranian crude exports.

"This is created in financial markets", he said.

"The camp of believers that $100 oil could be reached continues to expand, with spare capacity concerns continuing to grow", said Brian Kessens, managing director at investment services firm Tortoise. Prices have advanced 2.2 percent for the week, capping the longest streak of weekly increases since January.

Brent for December settlement declined $1.71 to close at $84.58 on the London-based ICE Futures Europe exchange. The contract closed down 0.1 percent Tuesday after rising to the highest close since November 24, 2014 in the previous session.

"Current levels may be a little bit high", Novak said, commenting on the current price of oil.

"I've had conversations (with Indian officials on purchase of Iranian oil)".

But Goldman Sachs says the uptrend may not last.

Traders said the rising stocks were partly due to a relentless increase in USA crude oil production, which has jumped by a third since mid-2016 to a record 11.1 million bpd.

The oil supply shortage in the Mediterranean market, which will emerge once the US sanctions targeting Iranian oil come into force on November 4, is predicted to direct the market toward Russian Ural oil, a case that will eventually lead to intensified sea traffic in Istanbul and the Çanakkale Straits. To contact the reporter on this story: Samuel Robinson in NY at srobinson145@bloomberg.net.