Published: Tue, September 25, 2018
Economy | By

Oil jumps to highest level since November 2014 as OPEC defies Trump

Oil jumps to highest level since November 2014 as OPEC defies Trump

OPEC, Russia and other countries ignored USA calls to increase crude oil production, sparking a Monday rally that saw Brent futures soar past the $80 mark.

At 1108 GMT, November WTI Crude Oil futures are trading $71.93, up $1.13 or +1.56% and December Brent Crude Oil futures are trading $79.98, up $1.74 or +2.22%.

J.P. Morgan said in its latest market outlook published last Friday that "a spike to US$90 per barrel is likely" for oil prices in the coming months due to the Iran sanctions.

They have reportedly been discussing raising output by half a million barrels a day to counter falling supply from Iran. While the group didn't take action on Sunday, it seems set on making sure the market doesn't get too carried away, said Mark Quartermain, Royal Dutch Shell Plc's vice president for global crude oil trading and supply.

Commodity traders Trafigura and Mercuria said today that Brent could rise to $90 per barrel by Christmas and pass $100 in early 2019, as markets tighten once US sanctions against Iran are fully implemented from November. Furthermore, it leaves the market extremely vulnerable to supply disruptions.

Mercuria Energy Group Daniel Jaeggi said prices may spike to over $100 a barrel in the fourth quarter because the market doesn't have much capacity left to replace more than 2 million barrels a day of Iranian exports that could be lost to sanctions.

Saudi Arabia and Russian Federation won't add significantly more oil to the market because of a lack of capacity, a top Iranian official said on Monday, predicting prices will probably rise further.

"In my opinion, President Trump's statement is the biggest insult to US-friendly states and nations in the region", Zanganeh said.

Further, oil prices are likely cheering the signs of tightening in the USA market ahead of Iran sanctions. But Energy Minister Khalid al-Falih said on Sunday such a move was not needed at the moment. The Saudi minister said returning to 100 per cent compliance was the main objective and should be achieved in the next two to three months.

"We have the consensus that we need to offset reductions and achieve 100 per cent compliance, which means we can produce significantly more than we are producing today if there is demand", Falih said.

Most oil companies expect peak oil demand will occur in the 2030s, while more bullish predictions say it could come in the 2020s as climate change regulations bite.

The U.S. shale oil boom has dramatically reshaped the energy landscape turning the country into a major oil producer - on track, in fact, to be the largest producer this year according to the Energy Information Administration.

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