Oil Advances as Traders Turn Bullish

Oil Advances as Traders Turn Bullish
Oil extends gains near the highest level in almost 4 years.

(Bloomberg) -- Oil extended gains near the highest level in almost four years as banks and trading houses said prices may spike after OPEC and its allies rebuffed President Donald Trump’s call to boost production.

Futures in London rose 0.5 percent after a 3.1 percent advance Monday. Mercuria Energy Group Ltd. and Trafigura Group expect the return of $100 a barrel last seen in 2014 due to a potential loss in Iranian supply. Bank of America Corp. joined JPMorgan Chase & Co. in predicting higher prices. Adding to positive sentiment are forecasts for a decline in U.S. stockpiles.

Oil rallied after the Organization of Petroleum Exporting Countries and its partners stopped short of pledging immediate production increases even though looming U.S. sanctions on Iran have started removing barrels from the market. Still, a trade standoff between the U.S. and China could put global economic growth and energy demand at risk in the longer term, with BP Plc warning that the risk hasn’t been priced into crude yet.

“OPEC gave a clear answer to Trump, who criticized the group for pushing for higher prices -- they obviously refused to submit,” said Satoru Yoshida, a commodity analyst at Rakuten Securities Inc. in Tokyo. “While the escalation of the U.S.-China trade war is a negative factor, it’s overshadowed by OPEC’s bullish comment.”

Brent for November settlement rose as much as 49 cents to $81.69 a barrel on the ICE Futures Europe exchange and traded at $81.62 at 3:45 p.m. in Tokyo. The contract climbed $2.40 to $81.20 on Monday. The global benchmark traded at a $9.28 premium to West Texas Intermediate for the same month.

WTI for November delivery traded at $72.34 a barrel on the New York Mercantile Exchange, up 26 cents. The contract climbed $1.30 to $72.08 on Monday. Total volume traded was about 36 percent below the 100-day average.

Chinese crude futures for December delivery added 3.6 percent to 551.1 yuan on Tuesday from Friday’s close. Trading on the Shanghai International Energy Exchange was closed on Monday for a public holiday.

$100 Oil

With the U.S. sanctions on Iran taking full effect in early November, the $100-oil scenario could be becoming more realistic. Brent crude may spike to above that level in the fourth quarter as the market doesn’t have enough excess capacity to replace Iranian barrels, Mercuria co-founder Daniel Jaeggi said. That bullish prediction was echoed by Trafigura co-head of oil trading Ben Luckock, who said Iran’s supply will be lower than most people had expected.

Meanwhile, U.S. crude inventories are forecast to have fallen for a sixth week, according to a Bloomberg survey of analysts before Energy Information Administration data due Wednesday. Stockpiles at the Cushing storage hub in Oklahoma may have decreased 150,000 barrels in the week ended Sept. 21, according to a forecast compiled by Bloomberg.

Other oil-market news:

Unipec, the trading unit of top Chinese refiner Sinopec, has put a plan to boost U.S. crude imports on hold as it assesses the impact of the Asian nation’s trade war with America, according to company president Chen Bo. U.S. crude exports may rise to 5 million barrels a day by 2025 from 2 million barrels a day in 2018, Thomas Waymel, president of trading and shipping at Total SA, said. CME Group Inc. is to start offering an oil futures contract based on prices in Houston.

To contact the reporter on this story: Tsuyoshi Inajima in Tokyo at tinajima@bloomberg.net To contact the editors responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net Ovais Subhani


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