Oil gains after Opec says glut nearly gone

Adjust Comment Print

They include Trump's decision to withdraw from the Iran nuclear agreement, Saudi Arabia's desire for $85-a-barrel oil prices (a level the International Monetary Fund says it needs to balance its budget), a production cooperation agreement between OPEC members (led by Saudi Arabia) and non-OPEC members (led by Russia) to support oil prices, the upcoming USA driving season (which tends to increase demand) and the upcoming intital public offering of Aramco, Saudi Arabia's state-owned oil company.

Almost 90% of the projected 1.7m bbl/day crude supply growth expected this year from non-OPEC countries is likely to come from the USA, with the country also standing as the key driver of global uncertainty in the market, club of oil-producing nations OPEC said on Monday.

Of course, not everyone is as cool headed as Pradhan or Mazroui: Claudio Descalzi, CEO of Italian oil and gas giant ENI, told CNBC that "The impact is more for the crude oil price, because Iran now is exporting about 2.6 million barrels [per day], and if we go back to the first sanctions, they were exporting 1.5 million".

Mousavi, whose NIOTC is tasked with controlling Iran's oil export facilities, went on to say that Iran now had no oil stored in its tankers, which means that the Islamic republic goes on selling its oil reserves, with exports as of March 2017-2018 hitting roughly 800 million barrels, IRNA reported. While those nations have vowed to stand by the agreement, there is little likeliness that United States allies would side with Iran in this issue.

Brent crude futures, the worldwide benchmark for oil prices, were at $78.30 a barrel at 4.32am GMT, up 7c from their last close and not far off a three-and-a-half-year high of $78.53 a barrel reached the previous session.

However, US trade policy is also driving global market unease, OPEC added, citing the potential trade war with China, tariffs on steel and aluminium, the breakaway from the Iran nuclear deal, and prolonged North American Free Trade Agreement (NAFTA) talks.

The report is the last one before the oil ministers' meeting in Vienna to discuss the oil production ceiling two weeks later.

"Plus we see a high likelihood of OPEC working with Russian Federation in 2019 to set a floor on oil prices", analysts wrote in their report.

The tightening market has all but eliminated a global supply overhang which depressed crude prices between late 2014 and early 2017.

As of this writing, the oil companies that already advised on price increases include Flying V of the Villavicencio Group, Pilipinas Shell Petroleum Corporation, PTT Philippines, Chevron (which is carrying the Caltex brand) and Seaoil effective 6:00am on Tuesday; while the rest of the industry players are expected to follow the price adjustment trends. "Plus we see a high likelihood of OPEC working with Russian Federation in 2019 to set a floor on oil prices".

Thanks to strong demand in 2017 and OPEC supply cuts, the crude oil market is looking a lot more balanced.

The U.S. decision to leave the Iran nuclear deal had largely been priced into the oil markets ahead o the announcement.