Oil firm on Iran sanctions, but rising US supply and strong dollar weigh

Traders said prices were held back by a strong dollar which makes oil imports more expensive for countries using other currencies domestically. (Reuters)
Updated 03 October 2018

Oil firm on Iran sanctions, but rising US supply and strong dollar weigh

  • Global oil markets remained tense because of the looming US sanctions against Iran’s oil exports
  • Fuel consumption is strong, growing especially fast in Asia’s emerging economies

SINGAPORE: Oil prices were firm on Wednesday on expectations of tighter markets once US sanctions target Iran’s petroleum industry from next month, although a strong dollar and rising US crude supply curbed gains.
Brent crude oil futures were at $84.86 per barrel at 0340 GMT, up 6 cents from their last close.
US West Texas Intermediate (WTI) crude futures were up just 1 cent at $75.24 a barrel.
Traders said global oil markets remained tense because of the looming US sanctions against Iran’s oil exports, which kick in from November 4.
Brent and WTI earlier this week both reached levels last seen in November 2014, and the two contracts have risen by around 20 and 17 percent respectively since mid-August.
Despite this, traders said prices were held back by a strong dollar which makes oil imports more expensive for countries using other currencies domestically, as well as by climbing supply in the US.
US commercial crude inventories rose by 907,000 barrels in the week to Sept. 28 to 400.9 million, the private American Petroleum Institute (API) said on Tuesday. Refinery crude runs fell by 158,000 barrels per day (bpd), API data showed.
Official weekly government data is due from the Energy Information Administration on Wednesday.
Traders said the rising stocks were partly due to a relentless increase in US crude oil production, which has jumped by a third since mid-2016 to a record 11.1 million bpd.
“We expect US crude production to exit the year at 11.3 million bpd,” Barclays bank said in a note on Tuesday.
That would mean the United States challenges Russia as the world’s biggest crude oil producer.
On the demand side, fuel consumption is strong, growing especially fast in Asia’s emerging economies.
However, high crude prices, combined with widespread emerging market currency weakness, threaten growth.
“That oil prices are rising to elevated levels at the same time as emerging market currencies hit record lows will be a flashing signal to OPEC members that demand may be at risk of a sharp correction,” said Emirates NBD bank.


OPEC sees small 2020 oil deficit even before latest supply cut

Updated 12 December 2019

OPEC sees small 2020 oil deficit even before latest supply cut

  • OPEC keeps its 2020 economic and oil demand growth forecasts steady and is more upbeat about the outlook

LONDON: OPEC on Wednesday pointed to a small deficit in the oil market next year due to restraint by Saudi Arabia even before the latest supply pact with other producers takes effect, suggesting a tighter market than previously thought.

In a monthly report, OPEC said demand for its crude will average 29.58 million barrels per day (bpd) next year. OPEC pumped less oil in November than the average 2020 requirement, having in previous months supplied more.

The report retreats further from OPEC’s initial projection of a 2020 supply glut as output from rival producers such as US shale has grown more slowly than expected. This will give a tailwind to efforts by OPEC and partners led by Russia to support the market next year.

OPEC kept its 2020 economic and oil demand growth forecasts steady and was more upbeat about the outlook.

“On the positive side, the global trade slowdown has likely bottomed out, and now the negative trend in industrial production seen in 2019 is expected to reverse in 2020,” the report said.

Oil prices were steady after the report’s release, trading near $64 a barrel, below the level some OPEC officials have said
they favor.

The Organization of the Petroleum Exporting Countries, Russia and other producers, a group known as OPEC+, have since Jan. 1 implemented a deal to cut output by 1.2 million bpd to support the market. At meetings last week, OPEC+ agreed to a further cut of 500,000 bpd from Jan. 1 2020.

The report showed OPEC production falling even before the new deal takes effect.

In November, OPEC output fell by 193,000 bpd to 29.55 million bpd, according to figures the group collects from secondary sources, as Saudi Arabia cut supply.

Saudi Arabia told OPEC it made an even bigger cut in supply of over 400,000 bpd last month. The Kingdom had boosted production in October after attacks on its oil facilities in September briefly more than halved output.

The November production rate suggests there would be a 2020 deficit of 30,000 bpd if OPEC kept pumping the same amount and other factors remained equal, less than the 70,000 bpd surplus implied in November’s report and an excess of over 500,000 bpd seen in July. OPEC and its partners have been limiting supply since 2017, helping to revive prices by clearing a glut that built up in 2014 to 2016. But higher prices have also boosted US shale and other rival supplies.

In the report, OPEC said non-OPEC supply will grow by 2.17 million bpd in 2020, unchanged from the previous forecast but 270,000 less than initially thought in July as shale has not grown as quickly as first thought.

“In 2020, non-OPEC supply is expected to see a continued slowdown in growth on the back of decreased investment and lower drilling activities in US tight oil,” OPEC said, using another term for shale.