Return of $100 Oil Seen by Top Traders
(Bloomberg) -- Major oil trading houses are predicting the return of $100 crude for the first time since 2014 as the market braces for the loss of Iranian supplies because of U.S. sanctions.
Mercuria Energy Group Ltd. co-founder Daniel Jaeggi said prices may spike to over $100 a barrel in the fourth quarter because the market doesn’t have much capacity left to replace more than 2 million barrels a day of Iranian exports that could be lost to sanctions. Trafigura Group co-head of oil trading Ben Luckock sees $90 oil by Christmas and $100 in early 2019.
Key Takeaways
- Such a price rally would mark the first time since the summer of 2014 that oil would return to the $100-a-barrel level that became the norm in the early part of this decade.
- Such prices made oil companies like Exxon Mobil Corp. the world’s most valuable firms and spurred investment in risky billion-dollar oil projects.
- The talk of $100 crude comes just hours after OPEC and its allies rebuffed pressure from U.S. President Donald Trump to immediately boost production to lower oil prices.
- It could prompt Washington to consider extraordinary measures, including the use of the Strategic Petroleum Reserve, to cool down fuel prices ahead of the U.S. mid-term elections.
“The market does not have the supply response for a potential disappearance of 2 million barrels a day in the fourth quarter,” Jaeggi said in a speech at the S&P Global Platts Asia Pacific Petroleum Conference (APPEC) in Singapore. “In my view, that makes it conceivable to see a price spike north of $100 a barrel.”
Brent crude, the benchmark for more than half the world’s oil, was trading up 1.6 percent at $80.02 a barrel at 1:34 p.m. Singapore time.
When Trump in May announced plans to reimpose sanctions on Iran’s oil exports, the market estimated a cut of about 300,000 to 700,000 barrels a day, according to Trafigura’s Luckock. However, the consensus has now moved to as much as 1.5 million barrels daily as the U.S. is “incredibly serious” about its measures, he said.
“It’s going to be significantly less than it was, and probably lower than most people expected when the sanctions were announced -- hence the higher prices,” Luckock said at the APPEC event.
In addition to U.S. sanctions cutting Iranian supply, the world is also dealing with a decline in Venezuelan oil production due to an economic crisis in the Latin American nation, according to Trafigura’s Luckock. The biggest source of new global supply, U.S. shale, is also experiencing growing pains as pipeline bottlenecks and workforce issues may hamper growth, he said.
Citigroup Inc. also flagged the possibility of triple-digit crude prices in a Sept. 24 research note.
“While Citi is pricing in Brent (ICE) crude at around $80 for the quarter ahead, balances are precarious and the lack of spare capacity could see crude pricing well above $90 or even $100 should all of the potential risk in the market materialize,” analysts including Ed Morse said in the note.
To contact the reporters on this story: Javier Blas in London at jblas3@bloomberg.net ;Heesu Lee in Seoul at hlee425@bloomberg.net ;Alfred Cang in Singapore at acang@bloomberg.net ;Dan Murtaugh in Singapore at dmurtaugh@bloomberg.net To contact the editors responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net Anna Kitanaka
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- Japan Failing to Meet Corporate Demand for Clean Power: Amazon
- Russian Navy Enters Warship-Crowded Red Sea Amid Houthi Attacks
- Libya's Surprise Oil Minister Change Throws Spotlight on Output
- Oil Seals Quarterly Gain in Tightening Market
- Oman Sees Increasing Ship-to-Ship Transfers of Russian Oil Bound for India
- Falcon Oil Declares Commercial Flow Test Results for Shenandoah Well
- Macquarie Strategists Expect Brent Oil Price to Grind Higher
- Japan Failing to Meet Corporate Demand for Clean Power: Amazon
- UK Oil Regulator Publishes New Emissions Reduction Plan
- Pennsylvania County Joins List of Local Govts Suing Big Oil over Climate
- PetroChina Posts Higher Annual Profit on Higher Production
- US, SKorea Launch Task Force to Stop Illicit Refined Oil Flows into NKorea
- McDermott Settles Reficar Dispute
- Russian Navy Enters Warship-Crowded Red Sea Amid Houthi Attacks
- USA Commercial Crude Oil Inventories Increase
- New China Climate Chief Says Fossil Fuels Must Keep a Role
- Oil Demand Outpaces Expectations, Testing Calculus on Peak Crude
- House Passes Protecting American Energy Production Act
- TotalEnergies Restarts Production in Denmark's Biggest Gas Field
- USA Oil and Gas Job Figures Jump
- Republican Lawmakers Say IEA Has Abandoned Energy Security Mission
- Blockchain Demands Attention in Oil and Gas
- Houthis Warn Saudi Arabia of Retaliation If It Backs USA Attacks
- Macquarie Sees USA Oil Production Exiting 2024 at 14MM Barrels Per Day
- Summer Pump Prices Set to Hit $4 a Gallon Just as Americans Hit the Road
- Chinese Mega Company Makes Major Oilfield Discovery
- VIDEO: Missile Attack Kills Crew Transiting Gulf of Aden
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Another Major Oilfield Discovery
- New China Climate Chief Says Fossil Fuels Must Keep a Role
- What Is the Biggest Risk to Offshore Oil and Gas Personnel in 2024?
- Vessel Sinks in Red Sea After Missile Strike
- Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess
- Analysts Reveal Latest Oil Price Outlook Following OPEC+ Cut Extension
- Equinor Makes Discovery in North Sea