Uncertainty Over Lost Production from Iran Sanctions Still Driving Upside Momentum

Darnell Taylor
September 25, 2018

Trump said last week that OPEC "must get prices down now!", but Iranian Oil Minister Bijan Zanganeh said on September 24 OPEC had not responded positively to Trump's demands.

Most oil companies expect peak oil demand will occur in the 2030s, while more bullish predictions say it could come in the 2020s as climate change regulations bite.

Kazempour said that he viewed Washington's increased political pressure on Iran and OPEC "something which can not be accepted".

The Middle East dominated Organization of the Petroleum Exporting Countries (OPEC), of which Iran is a member, as well as top producer Russian Federation, are discussing raising output by 500,000 bpd to counter falling supply from Iran, although the discussions are not finalised.

"With demand remaining strong in the short term, we still see oil balances constructing higher oil prices".

At 0840 GMT, Brent Brent North Sea crude for delivery in November soared as high as $80.94 per barrel.

Ben Luckock, co-head of oil trading at fellow merchant Trafigura said crude oil prices could rise to $90 per barrel by Christmas and to $100 by the New Year as markets tighten.

Russian Energy Minister Alexander Novak said no immediate output increase was necessary, although he believed a trade war between China and the United States as well as USA sanctions on Iran were creating new challenges for oil markets.

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One problem is the uncertainty over how much oil will be lost when the US -led sanctions against Iran begin in November. Output in Venezuela is also slumping due to an economic crisis.

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

"First, crude oil prices are rising against a strong dollar backdrop".

It's a tough balancing act with President Donald Trump calling for OPEC to increase production to push prices down.

Falih said Saudi Arabia had spare capacity to increase oil output but no such move was needed at the moment.

Sunday's meeting appeared to leave unresolved a disagreement which flared up in June between Saudi Arabia and Iran over whether OPEC members are allowed to pump more oil to make up shortfalls elsewhere. However, Saudi Arabia and Russian Federation now say they have no more capacity. The biggest source of new global supply, US shale, is also experiencing growing pains as pipeline bottlenecks and workforce issues may hamper growth, he said.

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

"If they kept quiet, the prices would be cheaper, I am confident about that", he added.

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