Published: Wed, September 26, 2018
Finance | By Cynthia Curry

Oil prices at highest levels in 4 years

Oil prices at highest levels in 4 years

Oil prices jumped more than 2 percent, hitting a four-year high, after the Organization of Petroleum Exporting Countries (OPEC) and other global producers declined to announce an immediate increase in production. Iran's OPEC representative Hossein Kazempour Ardebili on Sunday said his country was continuing to meet its OPEC quota share.

"Given the numbers we saw today, that (an output increase in 2019) is highly unlikely unless we have surprises on the supply and demand", Falih added. The sharp sell-off from June 2014 to January 2015, when the price fell from $114/bbl.to $47/bbl. has room for oil to move higher without too much technical resistance.

The bank said "the Iran factor may dominate the market near-term and cause a (crude price) spike", although it added that emerging market "demand concerns could reappear thereafter".

OPEC said it had revised its growth outlook for non-OPEC crude and liquids to 2023, and was now expecting growth to be 4 million bpd higher than in last year's report.

The OPEC governor, Hossein Kazempour Ardebili of Iran, said in comments to Reuters that Saudi Arabia and Russian Federation were unable and unwilling to add more production at short notice.

The Trump administration has told countries like China, India and Turkey to cut all imports of Iranian oil by November 4 when the United States re-imposes sanctions against Tehran.

Some have said softening demand from trade tensions between the United States and China to offset loss of Iranian supply, but Tradition's McGillian said that unless trade tensions show signs of eroding Chinese demand, oil prices will surge further.

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He also expected the OPEC "to attract more oil producer countries to join the agreements and help safeguard and sustain the global oil market balance".

Meanwhile, OPEC sees oil demand retreating in the near-term, to 31.6 million barrels a day in 2023 versus 32.6 million barrels a day in 2017, but it will rise to current levels, again, around the time that the USA shale supply peaks.

A meeting of OPEC and non-OPEC oil ministers in Algiers over the weekend concluded with the 15-nation cartel and its allies refraining from an urgent boost in output, despite President Trump's demands that it work harder to bring down prices. "We have been briefed on the prospect of 2019 inventory builds which result from significant supply growth from non-member counties", Falih said.

"The biggest issue is not with the producing countries, it's with the refiners, it's with the demand".

Bank of America's main scenario is for oil prices next year of around US$80 a barrel, according to the note.

The oil price is on course for its fifth consecutive quarterly increase, the longest stretch of gains since early 2007, when a six-quarter run led to a record high of $147.50 a barrel. That suggests OPEC's power to influence the market will be tempered by US production for about another decade.

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