Crude prices are spiking

Ivan Schwartz
September 25, 2018

The amount of oil being supplied to the global market is "satisfactory", Saudi Arabia's energy minister said Sunday, after US President Donald Trump called for an immediate output hike to push down prices, agencies reported.

Despite Trump's desire for OPEC producers to take action to lower prices, the cartel signaled over the weekend that it will boost output only if its customers requested it.

But a meeting of OPEC and non-OPEC energy ministers in Algiers ended without any formal recommendation for a supply boost. "In my view, that makes it conceivable to see a price spike north of US$100 a barrel".

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, according to Trafigura's Luckock.

His demand came after benchmark Brent oil reached $80 a barrel this month, despite his earlier assurances that U.S. curbs on Iran's oil exports would not affect the market because Saudi Arabia would make up for the shortage.

While output C-OUT-T-EIA remains around the record of 11 million barrels per day (bpd), recent subdued US drilling activity points towards a slowdown.

The price rally mainly stemmed from a decline in oil exports from OPEC member Iran due to fresh US sanctions.

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Opec, which was meeting in Algiers on Sunday to discuss how to share out an increase in output to bring down prices, sees the United States as soaking up most of the growth in production over the next 10 years.

USA light crude CLc1 was 1.25 dollars higher at 72.03 dollars.

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.

OPEC isn't the only organization that believes there is only so much US oil production can increase. The biggest source of new global supply, USA shale, is also experiencing growing pains as pipeline bottlenecks and workforce issues may hamper growth, he said.

There was good news from Libya, where oil production has climbed as high as 1.278 million barrels a day, the most since 2013, said Mustafa Sanalla, chairman of the state-run National Oil Corp. "The reason Saudi Arabia didn't increase more is because all of our customers are receiving all of the barrels they want".

"The US seeks to reduce Iranian oil exports to zero even for a month, but that dream would not come to reality", Bijan Zangeneh said on Monday.

Other reports by GizPress

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