Oil prices down but ready to leap, despite US pressures
The US tells the world that it will make sure oil markets are well supplied as the Nov.4 sanctions on Iran oil exports take effect.
In a speech at the UN, Trump admonished OPEC for not pumping more oil and for aiming to raise prices and accused it of monopolizing the oil market.
“We will ensure prior to the re-imposition of our sanctions that we have a well-supplied oil market,” Washington’s special envoy for Iran, Brian Hook, told a news conference at the United Nations General Assembly, CNBC reported.
What that did was calm down prices a bit which on Monday sprinted, registering strong gains, pushing WTI over $70 and Brent over $80 per barrel.
But OPEC, Iran, and the EU have other ideas and would see to it that oil prices have a chance of skyrocketing to the $100 levels, again.
But where do we stand now?
Taking a dip, before the final stretch
Brent oil edged further away from a four-year high on Wednesday and U.S. crude fell after the U.S. said it would ensure crude markets are well supplied before sanctions are re-imposed on Iran and as President Donald Trump criticized high prices, according to CNBC.
Brent crude futures were down 43 cents, or 0.5%, at $81.44 a barrel, after gaining nearly 1% the previous session, as Brent hit its highest since November 2014 at $82.55 per barrel.
U.S. crude futures were down 40 cents, or 0.65 at $71.88 a barrel.
“However, Brent is on course for its fifth consecutive quarterly increase, the longest such stretch for the global benchmark since early 2007, when a six-quarter run led to a record-high of $147.50 a barrel,” says CNBC.
Over the weekend, OPEC+ decided to take no further action to increase production even as Iran continues to lose supply at a torrid pace, according to several reports.
“Saudi Arabia said it would likely increase output in October but declined to offer specifics. The inaction was met with fears of a supply crunch from the market, pushing Brent up to its highest level in years. A growing number of analysts see higher prices as likely, perhaps even as high as $100 per barrel,” says OilPrice.com.
Xinhua media reported that the 10th OPEC and non-OPEC Joint Ministerial Monitoring Committee (JMMC) in Algiers wrapped up last Sunday by maintaining the current oil output level.
JMMC comprises four OPEC member countries, namely Algeria, Saudi Arabia, Kuwait and Venezuela, and two non-OPEC member countries, Russia and Oman.
In a clear response to Trump, OPEC President, also Emirati Energy Minister Suhail Mohamed Al Mazroui, said that “OPEC is not a political organization and does not succumb to (US) political pressures.”
“OPEC ‘s top mission is not to push towards raising or lowering oil prices, but to achieve a balanced market,” AL Mazroui said.
Crude inventories rose by 2.9 million barrels in the week to Sept. 21 to 400 million, compared with analyst expectations for a decrease of 1.3 million barrels, the American Petroleum Institute said, as reported by CNBC.
If not enough clients are buying, it becomes pointless to raise production, which Saudi’s production increase of 300,000-500,000 extra barrels per day (bpd) falling short of its pledge to pump as much as 1 million bpd, as agreed following a recent OPEC agreement.
“There is no agreement to raise production, and oil prices at $80 per barrel would be better off for both producers and consumers,” Saudi Arabia’s Energy Minister Khalid al-Falih told reporters.
Oil factors worrying the US
OilPrice.com reports that Europe is to establish an Iran workaround, saying the EU on Monday, ahead of Trump’s Address to the UN general assembly on Tuesday, declared it would set up a special financial vehicle (SPV) to allow Iran to evade U.S. sanctions.
“The ‘SPV’ would allow European companies to continue to do business with Iran while insulating them from the wrath of the U.S. Treasury,” said OilPrice.com.
Also, China’s Unipec, the trading unit of state-owned Sinopec, has reportedly shelved plans to increase oil imports from the US due to the ongoing, escalating trade war.
Bloomberg reports that Unipec had planned to increase imports to 500,000 bpd next year, up from an average of 300,000 bpd year-to-date.
Oil Price.com said Wood Mackenzie announced in a new report that upstream development is too sparse to satisfy demand in the years ahead. A lack of spending and new discoveries spell trouble.
“A supply gap opens up in the mid-2020s, reaching 3 million bpd by 2030, 7 million bpd by 2035 and a formidable 12 million bpd by 2040. Barring technology breakthrough beyond what we already assume, we’ll need new oil discoveries,” WoodMac said.
Oil production shortages could reach as much as 2 million bpd, thanks to Venezuela’s decreasing output to 1.3 million bpd from 3 million bpd at peak and export decreases in Iran as sanctions near.
US crude oil production was estimated by the Energy Information Administration for the week ending September 14 at 11.0 million bpd.