Sunday, 23 September, 2018

Oil prices fall as Trump demands OPEC 'reduce pricing now'

US oil touches $75 amid fears Iran will block Middle East shipments Jean Paul Pelissier Reuters
Elsie Buchanan | 08 July, 2018, 08:03

On Tuesday, crude closed near 78 dollars per barrel, driven higher by a sharp drop in US inventories and the expectation of more drivers hitting the road for the July 4 holiday.

Investors had questions as "to whether Saudi Arabia and Russian Federation could or would really be able to ramp production quickly enough", said Rob Haworth, who helps oversee US$151 billion at U.S. Bank Wealth Management in Seattle.

"It's finally here - the trade war the Trump administration has threatened to launch against China", commentary published Friday by China's official Xinhua News Agency read. But oil experts say that OPEC is already close to its maximum capacity.

An Iranian Revolutionary Guards commander said on Wednesday that Tehran might block oil shipments through the Strait of Hormuz, a major route for transporting crude in the Gulf.

The black gold broke its Asian consolidation range and fell sharply in the European session, largely on the back of resurgent US dollar demand across the board, as escalating US-Sino trade tensions continue to underpin the buck.

"On China, India - yes, certainly".

Brent crude oil edged up Wednesday after a second consecutive drop in US crude inventories, driven by an outage at the Syncrude Canada oil sands facility, which usually supplies the U.S.

The rally appears to be a "short covering situation - we were down nearly 2 percent yesterday", said Yawger.

Brent crude, the global benchmark, was down 19 cents at $77.20 a barrel while US crude slipped 2 cents to $72.92.

Hurricane Beryl first of Atlantic season
It is likely that the system becomes Tropical Storm Chris on Saturday and possibly reach hurricane strength early next week. This system looks to meander in the Atlantic between the Carolinas and Bermuda over the next few days.


United States (U.S.) President Donald Trump reiterated his call for the Organisation of the Petroleum Exporting Countries (OPEC) that exerts significant influence over oil prices to take action to halt crude's upward climb.

In a tweet on Saturday, Mr Trump said Saudi Arabia had agreed to increase oil output by up to two million barrels. Jimmy Carter struggled with high gas prices, which had doubled since the Iranian revolution. "Seems like this is sort of related to Trump tweets", said Stewart Glickman, energy equity analyst at CFRA Research in NY.

"Investors are cautious since no one knows to what extent the Iranian sanctions will impact the market, and disruptions globally are taking supplies out faster than expected", said Will Yun, a commodities analyst at Hyundai Futures in Seoul.

But in the current market where several OPEC countries have reduced production capabilities due to internal political turmoil-Libya and Venezuela are cases in point-it is uncertain whether Saudi Arabia can sustainably fill Iran's position.

Bloomberg reported that China and India are considering forming an "Oil Buyers' Club" to counter the market power of the Organization of Petroleum Exporting Countries is proof that the run-up in oil prices this year, from Dollars 30 a barrel to $80, is happening in a very different context than spikes of the past.

Over the short-run, Canada's production problems will go away and Libya's issue will probably be contained.

The Saudis have reported to OPEC that they had pumped 10.488 million bpd in June, up by 458,000 bpd from their self-reported figure for May, OPEC sources told Reuters.

Yuan-denominated futures for September delivery slid 1.4 percent to 496.7 yuan a barrel on the Shanghai International Energy Exchange.

While OPEC leader Saudi Arabia will pick up the slack, Morgan Stanley believes oil markets will be undersupplied by around 600,000 in the second half of 2018. The drawdown in stockpiles also remains oil-supportive in the near-term.

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