Energy
0

Crude Prices at 4-Year High, Producers Resist Output Rise

Crude Prices at 4-Year High, Producers Resist Output RiseCrude Prices at 4-Year High, Producers Resist Output Rise

Oil prices hit their highest since November 2014 on Tuesday, topping four-year highs from the previous day, as looming U.S. sanctions against Iran and reluctance by the Organization of the Petroleum Exporting Countries to raise output supported markets. 

Brent crude futures rose to $81.62 a barrel, levels not seen since November 2014. They were still at $81.61, up 41 cents, or 0.5% from their last close, CNBC reported. 

US West Texas Intermediate crude futures were at $72.37 a barrel, up 29 cents, or 0.4% from their last settlement. 

The United States says from Nov. 4 it will target Iran’s oil exports with sanctions, and Washington is putting pressure on governments and companies around the world to fall in line and cut purchases from Tehran. 

“Iran will lose sizeable export volumes, and given OPEC+ reluctance to raise output, the market is ill-equipped to fill the supply gap,” Harry Tchilinguirian, global head of commodity markets strategy at French bank BNP Paribas, told the Reuters Global Oil Forum on Tuesday. 

OPEC+ is the name given to the group of oil producers, including non-OPEC supplier Russia, that agreed to curtail output starting in 2017. 

While Britain, China, France, Germany, Russia and Iran on Tuesday said they were determined to develop payment mechanisms to continue trading despite the sanctions by the United States, most analysts expect Washington’s actions to knock between 1 million and 1.5 million barrels per day (bpd) of crude oil supplies out of markets. 

Ashley Kelty, oil analyst at financial services firm Cantor Fitzgerald said crude could soon hit $90 per barrel. 

“We don’t believe OPEC can actually raise output significantly in the near term, as the physical spare capacity in the system is not that high,” Kelty said. 

“If OPEC is physically unable to ramp up production, then prices do indeed have much further to run,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA in Singapore. 

Bank of America Merrill Lynch lifted its average Brent price forecast for 2019 from $75 per barrel to $80, and increased its WTI forecast by $2 to $71 per barrel. 

It 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.”

Add new comment

Read our comment policy before posting your viewpoints

Financialtribune.com