Published: Thu, September 27, 2018
Finance | By Cynthia Curry

Hedge funds bet on shortage of Brent oil: Kemp

Hedge funds bet on shortage of Brent oil: Kemp

Kazempour Ardebili added that producers could nonetheless increase their production to see the prices slightly decline below $80 per barrel in order to appease Washington in its sanctions push against Iran. If Brent prices climb past $82 a barrel, he said prices up to $90 would be a near-term possibility.

It aims to ensure the achievement of the objectives of the Declaration of Algiers on reducing oil outputs by 1.8 million barrels a day to adjust production in the range of 32.5 to 33 million barrels per day to boost plunging prices.

"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 said, Reuters reported.

"The OPEC and the Middle Eastern producers' actual crude production capability is up ... but it's the disruption in supply and exports [such as the economic sanctions on Iran and Venezuelan economic turmoil] that's supporting the oil prices", said Chris Midgely, global director of analytics at Platts.

The president has criticised OPEC for rising oil prices four times on Twitter this year as well as in an interview with Fox News (https://tmsnrt.rs/2MUmIWZ). CME Group Inc.is to start offering an oil futures contract based on prices in Houston.

As new U.S. sanctions against Iran come into force on November 4, importers would find it harder to buy oil from Tehran.

The higher oil prices could cause problems for Trump in the lead up to the midterm congressional elections in November.

But speaking to NBC News on Monday, Iranian President Hassan Rouhani said the USA didn't have the capability to bring the Islamic Republic's oil exports down to zero.

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"The conditions of the market and the production status of oil producers are not as such to allow finding an easy replacement for Iran's oil and remove it from oil markets".

That effectively means compensating for falling Iranian production.

The market estimates that this will lead to a cut of at least 1.5 million barrels a day.

Despite the bullish sentiment, some traders said current prices already reflected the tighter market, and that more oil would be coming in 2019.

The Organization of the Petroleum Exporting Countries as well as top producer Russian Federation has been discussing raising output to counter falling supply from Iran, although no decision has been made public yet.

US President Donald Trump slammed the Organization of the Petroleum Exporting Countries (OPEC) last week, saying the 15-member oil cartel should keep crude prices low because of the military protection the US provided for the region.

"Depending on the severity and the duration of the Iranian sanctions, the market simply does not have an adequate supply response for 2 million b/d of oil disappearing from the market".

In August, OPEC and its allies cut production by 600,000 bpd more than their pact required, mainly as a result of falling output in Iran as customers in Europe and Asia reduced purchases ahead of the US sanctions deadline.

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