Published: Mon, September 24, 2018
Business | By Tara Barton

Crude Oil Gaps Higher After OPEC Cools Off Production Hikes


An Iranian tanker and a South Korean (right) tanker docking at the platform of the oil facility in the Khark Island.

OPEC, along with a group of Russia-led producers, put a cap on output in January 2017 in response to a supply glut and a sustained rout in oil prices that bankrupted USA energy firms and escalated unrest in exporting countries.

"Trade war and emerging-market contagion fears could still serve to keep a lid on prices in the near term, but we believe that the geopolitical risks remain skewed quite heavily to the upside", wrote analysts led by Helima Croft, global head of commodity strategy at RBC Capital Markets, in a note.

Oil is reporting gains on both sides of the Atlantic, courtesy of tightening market conditions and less urgency among the top producers to curb price rise.

Brent crude rose more than 3% to more than $81 a barrel on Monday, its highest level since November 2014.

The Organization of the Petroleum Exporting Countries and non-OPEC states, including top producer Russian Federation, gathered in Algiers on Sunday for a meeting that ended with no formal recommendation for any additional supply boost to counter falling supply from Iran.

"My information is that the markets are adequately supplied".

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Oil leaped after the world's top producers made a decision to maintain output during a meeting in Algeria at the weekend.

While viewing high demand as healthy, the organisation noted that the trend was fuelled by developing countries undergoing major demographic and general economic expansion.

"Fears that supply will be hit when the United States sanctions on Iran kick in come November are pushing up oil prices".

A source familiar with OPEC discussions told Reuters on Friday that OPEC and other producers had been discussing the possibility of raising output by 500,000 bpd.

A further complicating factor is the US trade dispute with China, which is likely to result in Chinese refiners buying less crude from the United States, disrupting what had become a significant trade flow.

While it's possible that refiners around the world will be able to juggle their supplies to work around the politically-created disruptions, this is likely to come at a cost.

Looking ahead, crude oil prices await the release of US Energy Information Administration and Department of Energy inventory figures later this week.

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