Tue, Sep 25, 2018 - Page 10 News List

Oil gains as OPEC holds its ground

BY POPULAR REQUEST:The Saudi energy minister said the global oil buyers are ‘well-supplied,’ even as traders predicted a spike in prices due to sanctions on Iranian sales


Brent crude climbed above US$80 a barrel after OPEC and its allies signaled less urgency to boost output, despite US pressure to temper prices.

Futures in London rose as much as 1.7 percent.

OPEC and its partners gave a tepid response to US President Donald Trump’s demand that rapid action be taken to reduce prices, saying that they would boost output only if customers wanted more cargoes.

Brent could rise to US$100 for the first time since 2014 as the market braces for the loss of Iranian supplies due to US sanctions, according to Mercuria Energy Group Ltd and Trafigura Group.

Oil has rallied since the lows of last month as speculation swirls over whether OPEC and its allies will boost output as the sanctions on the Middle Eastern nation’s exports nears.

Still, a full-blown trade war between the US and China could imperil global economic growth that underpins crude demand as the two countries begin a new round of tariffs on each other’s goods.

Oil investors are “trading the weekend news very favorably,” said Stephen Innes, Singapore-based head of Asia-Pacific trading with Oanda Corp. “Saudi Arabia and Russia ruled out any expeditious supply increases at the Algeria meeting, while decidedly ignoring US President Trump’s call to increase supplies and ease price pressures.”

West Texas Intermediate (WTI) for November delivery added US$1.25 to US$72.03 a barrel on the New York Mercantile Exchange.

The contract on Friday climbed US$0.46 to US$70.78. Total volume traded was about 26 percent above the 100-day average.

Brent for November settlement rose as much as US$1.63 to US$80.43 a barrel on the ICE Futures Europe exchange and traded at US$80.32 at 3:21pm in Tokyo yesterday.

The contract on Friday advanced US$0.10 to US$78.80.

The global benchmark traded at an US$8.29 premium to WTI for the same month.

Trading on the Shanghai International Energy Exchanged was closed for the Mid-Autumn Festival. The contract for December delivery fell 0.7 percent on Friday.

Saudi Arabia signaled it is in no rush to bring oil prices down from current levels.

“The market is well-supplied,” Saudi Arabian Minister of Energy and Industry Khaled al-Falih said after the OPEC meeting in Algeria over the weekend. “The reason Saudi Arabia didn’t increase more is because all of our customers are receiving all of the barrels they want.”

The lack of OPEC’s immediate action could mean higher prices.

Brent crude might spike to more than US$100 in the fourth quarter of this year because the market does not have much capacity left to replace Iranian supplies, Mercuria cofounder Daniel Jaeggi said at the annual Asia-Pacific Petroleum Conference (APPEC) in Singapore yesterday.

Trafigura cohead of oil trading Ben Luckock said at the conference that he sees US$90 oil by Christmas and US$100 early next year.

Meanwhile, the risk of escalating trade tensions between the US and China could weigh on oil prices, with no improvement in relations between the two rivals in sight.

About US$200 billion of Chinese products became subject to increased tariffs from noon Beijing time yesterday.

That is on top of the US$50 billion in goods imposed earlier this year.

Meanwhile, US$60 billion of goods from the US were to become subject to Chinese tariffs about the same time, adding to the US$50 billion already levied.

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