Iran oil minister says hopes OPEC will not follow US orders

Fredrick Soto
September 27, 2018

Benchmark Brent crude on September 24 hit its highest since November 2014 at $80.94 per barrel, before falling back to around $80.65.

USA commercial crude oil inventories C-STK-T-EIA are at their lowest since early 2015 and although US oil production C-OUT-T-EIA is near a record high of 11 million bpd, subdued USA drilling points toward a slowdown in output. Reuters reported on September 5 that Saudi Arabia wants oil to stay between $70 and $80 a barrel to keep a balance between maximizing revenue and keeping a lid on prices until US congressional elections.

The growing need for OPEC and its partners to start raising production and export volumes amid faltering Venezuelan output and pending re-imposition of U.S. sanctions on Tehran emerged as one the key discussion topics in the preliminary sessions at the S&P Global Platts Asia Pacific Petroleum Conference in Singapore.

"We are not targeting a price, we are aiming for the stability of the market", for its part, has argued the minister emirati Energy, Souhail al-Mazrouei, chairman of the conference of the Opec.

An oil price spike is starting to look increasingly possible, with a rerun of 2008 not entirely out of the question, according to a new report.

In its annual World Oil Outlook, the Organisation of Petroleum Exporting Countries forecast world supply of all hydrocarbons (primarily oil and liquified natural gas) would rise from a current 98.4 million barrels per day (mbd) to 104.5 million by 2023, and 111.9 million by 2040.

WTI for November delivery traded at $72.34 a barrel on the New York Mercantile Exchange, up 26 cents.

Saudi energy minister Khalid al-Falih said the oil market is balanced and that its partners have increased production in response to rising prices.

Meanwhile, higher oil prices tend to benefit UK-listed companies such as BP and Royal Dutch Shell, which employ thousands of people in the North Sea and whose shares are staples in many United Kingdom pension funds.

A meeting of OPEC and its allies ended without any decision to further increase oil output despite President Donald Trump's call for lower prices. The choking of the flow of oil from Iran comes at a time when threats of supply disruptions in Venezuela, Libya and Nigeria have increased as well.

Strong bullish sentiment is boosted by fears on impact from looming U.S. sanctions against Iran as well as OPEC's unwillingness to increase production and support oil markets which may face the shortage in oil supply, once Iran is out. Furthermore, it leaves the market extremely vulnerable to supply disruptions.

Iran told OPEC its production had been steady in August at 3.8 million bpd.

Mihir Kapadia, of Sun Global Investments, said: "With Brent crude already above $80.50 per barrel, we can expect the oil markets to close at early $90s by the end of the year and touch $100s by March 2019".

OPEC in December 2016 concluded an agreement with non-member states-including Russia-to reduce output in order to arrest sliding prices.

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