Friday, 14 December, 2018

Oil price steady at four-year high as supply concerns remain

Markets are edgy that an embargo on Iranian crude exports will be harsher than before and wreak havoc on markets. ─ Reuters  File Markets are edgy that an embargo on Iranian crude exports will be harsher than before and wreak havoc on markets. ─ Reuters File
Laurie Berry | 03 October, 2018, 16:40

That, analysts said, bodes well for overall demand for crude oil to keep increasing, driven by emerging markets and continued growth in the global economy.

Brent has risen by more than 20 percent from its most recent lows in August.

"The general impression out there now seems to be that there is either an outright inability or at least a certain unwillingness on the part of key OPEC/OPEC-plus members to compensate for the expected continuation of declining Iranian export flows", said consultancy JBC Energy.

"The [new Nafta] deal reduces the fear of significantly lower GDP and global growth due to tariffs and a trade war", said Kyle Cooper, a consultant at ION Energy.

Brent and WTI have roughly tripled compared with lows seen in January 2016, when oil cartel Opec and allies led by Russian Federation started to curb oil supplies to rebalance an oversupplied market.

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.

Oil has risen to the highest in nearly four years in London after OPEC showed little enthusiasm for raising output despite President Donald Trump's demand for lower prices. Since the end of June 2017, Brent has increased 73 percent.

LEADING OFF: Rockies head to Wrigley for wild-card one-off | AP sports
Holds don't look as pretty on the stat sheet as wins or saves, but that hasn't seemed to bother the Brewers' Josh Hader . This time garnering only three hits. "If we lose, we've played more games in a row before, so we'll be ready to play".

Projections must take into account a host of factors - from world economic growth, refinery operations and changing fuel use patterns on the demand side, to investment patterns, rates of mature oilfield decline, weather, politics, war and OPEC on the supply side.

On Monday, WTI and Brent prices rallied after OPEC' s decision. The bullish breakout can lead oil prices towards $74.30.

Speaking at the United Nations General Assembly in NY last week, Trump said OPEC members were "as usual ripping off the rest of the world".

Some analysts question whether Saudi Arabia has enough spare capacity to replace all the barrels lost as a result of sanctions while maintaining enough in reserve to meet any further shortfalls.

US President Donald Trump is calling on the global community to suspend imports of crude from Iran by November, driving up prices globally. Oil prices are not inherently self-stabilising and display strongly non-linear and cyclical behaviour.

In the oil market, balance is a hard game. It is very hard to balance it just right.

By that point, prices will already be close to peaking, extra OPEC and non-OPEC supplies will come too late, with consumption already slowing, and add to the subsequent slump.

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