OPEC raises forecast based on U.S. oil production

Fredrick Soto
September 24, 2018

Oil prices have been rising since early 2017, when the Organisation of the Petroleum Exporting Countries (OPEC) together with other suppliers including Russian Federation started withholding output to lift crude values.

Brent for November settlement rose as much as US$2.14 to US$80.94 a barrel on the ICE Futures Europe exchange and traded at US$80.66 at 9:58 a.m.in London.

The move helped push crude prices to a four-year high near $81 a barrel on Monday.

Mr Trump said last week that OPEC "must get prices down". Trump wrote on Twitter.

Furthermore, the commodity has also rallied in the wake of USA sanctions on Iranian oil exports and fears about OPEC-member depletion rates.

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Iran told OPEC its production had been steady in August at 3.8 million barrels per day.

Early last week, the market was supported by a report which said Saudi Arabia would be comfortable with Brent prices over $80 a barrel.

For all these urgent supply pressures, the world's largest oil producers adopted a sit-back-and-wait approach at their meeting in the Algerian capital on Sunday.

Nearly 2 million barrels per day (bpd) of crude could be taken out of the market as a result of the USA sanctions against Iran by the end of the fourth quarter this year, said Daniel Jaeggi, president of commodity merchant Mercuria Energy Trading, making a crude price spike to US$100 a barrel possible.

OPEC isn't just grappling with US sanctions cutting Iranian supply.

This year the global economy has been expanding strongly, leading to growth in oil consumption and pushing up crude prices.

Oil prices were at their highest levels since 2014 in trading Monday, after the Organization of Petroleum Exporting Countries decided not to raise output.

Now, however, Iran's OPEC governor, Hossein Kazempour Ardebili, said, "If there is a fall not only from Iran, but anybody else, it is the responsibility of OPEC and non-OPEC to balance the market".

Al Falih said returning to 100 per cent compliance was the main objective and should be achieved in the next two to three months. "We in Saudi Arabia have not seen demand for any additional barrel that we did not produce".

The U.S. decision to re-impose sanctions on Iran is already forcing refiners to look elsewhere for supplies of the heavy, sour crudes supplied by the Islamic Republic.

"We still have a job to complete which is going to the 100 per cent", said Al Mazrouei on the sidelines of a meeting by Opec and non-Opec energy ministers.

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