SINGAPORE (Reuters) – Oil markets remained strong on Tuesday, with Brent crude near four-year high reaching its previous session.
FILE PHOTO: A worker walks on the Zubair oil field in Basra, Iraq May 9, 2018. REUTERS / Essam al-Sudani
The oil markets have been driven by the impending US sanctions on Iran and the unwillingness or inability of the Middle East-dominated producer cartel OPEC and Russia to increase production.
Brent Crude Futures LCOc1 was $ 81.32 per barrel at 0209 GMT, up 12 cents or 0.2 percent, and not far from the $ 81.48 a barrel the previous day, its highest level since November 2014.
West Texas Intermediate (WTI) CLc1 crude oil futures were $ 72.10 a barrel, 2 cents above their last settlement.
The United States will begin sanctions on Iran's oil exports from November, and Washington is pressuring governments and companies worldwide to adapt to Tehran.
"Iran will lose considerable export volumes, and given the restraint of OPEC +, the market will be ill-equipped to fill the supply gap," said Harry Tchilinguirian, Global Head of Commodity Markets Strategy at French bank BNP Paribas to Reuters Global Oil Forum Tuesday. OPEC + includes Russia.
(For a graphic to & Brent Crude Price History & # 39 ;, click on tmsnrt.rs/2xATyY1)
US President Donald Trump has demanded that the Organization of Petroleum Exporting Countries (OPEC), of which Iran is a member, and Russia increase their supplies to offset the expected decline in Iranian exports.
However, OPEC and Russia have so far rejected such calls.
A formal decision on producer group oil production will not take place until the December meeting, unless an extraordinary meeting is held, so the windows of opportunity in which oil prices can potentially increase profits are quite large, as Iran loses exports and OPEC + remains in standby mode, "Tchilinguirian said.
Ashley Kelty, analyst for oil and gas research at financial services firm Cantor Fitzgerald, said oil prices could soon reach $ 90 a barrel.
"We do not believe that OPEC can significantly increase production in the near future, as the physical reserve capacity in the system is not that high," Kelty said.
Bank of America Merrill Lynch said it raised its Brent crude oil price forecast for 2019 from $ 75 a barrel to $ 80 a barrel, while increasing its $ 201 WTI crude oil forecast in 2019 to $ 71 a barrel.
The US bank said, "The Iran factor could dominate the market in the near term and cause a rise in (crude oil) prices, though he added that concerns about emerging market demand could thereafter recur."
Indian refineries – fighting high crude oil prices and a moving rupee – plan to reduce oil imports, which may be a first sign that high prices are beginning to weigh on demand.
Reporting by Henning Gloystein; Editing by Richard Pullin