Iran appears to soften stance on OPEC oil output increase

Dwayne Harmon
September 25, 2018

"South Korea was the first country to halt Iran's oil imports following the USA sanction threats against the country", Kasra Nouri, the public relation manager of the ministry, was quoted as saying by SHANA news agency. USA commercial crude oil inventories are at their lowest since early 2015 and although United States oil production is near a record high of 11 million barrels per day (bpd), subdued U.S. drilling activity points toward a slowdown in output.

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

"I do not influence prices", Saudi Energy Minister Khalid al-Falih told reporters as OPEC and non-OPEC energy ministers gathered in Algiers for a meeting that ended with no formal recommendation for any additional supply boost.

At Sunday's meeting in Algiers, OPEC oil ministers and non-OPEC signatories to the 2016 agreement discussed extending their cooperation.

Meanwhile, China's oil imports from Iran reportedly plunged by around 250,000 barrels per day (bpd) in August compared to a month earlier, though Beijing signaled its intent to keep buying.

The price rise is notably caused by a recent drop in Iran's supply because of USA sanctions. The last time prices were sustained at that level was 2014.

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The price of crude oil has jumped from about $50 (£38.29) a barrel in late 2016 to highs of $80 this summer, partly due to the cartel's agreement with Russian Federation to cut production for 18 months.

OPEC put Iran's current production at 3.58 million bpd, down some 300,000 bpd from the start of the year, according to OPEC's secondary sources such as researchers and ship-trackers.

Trump has been calling publicly for OPEC to help lower prices by producing more. The biggest source of new global supply, US shale, is also experiencing growing pains as pipeline bottlenecks and workforce issues hamper growth.

"We believe that Saturday's terrorist attack in Iran could prove to be the weekend's more consequential event as it will likely exacerbate the already risky Middle East antagonisms", Helima Croft, global head of commodity strategy at RBC Capital Markets, said Sunday.

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. "The reason Saudi Arabia did not increase more is because all of our customers are receiving all of the barrels they want".

OPEC projects that "the strongest annual increases are seen in the near-term, in which total US tight oil increases by an average of 1.4 million barrels a day" annually from this year to 2020.

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