Trump, Oil Barometers Rising As Iran Sanction Nears
The Saudi government is said to be taking this seriously — they recently hired a lobbyist in Washington D.C. to fight the bill; and Kuwait has not exported crude oil to the United States in four weeks.
OCT 3, 2018 (BE2C2 Report): Crude oil prices reached levels not seen in four years Wednesday, with Brent prices topping $85.26 a barrel and WTI soaring to $75.44.
U.S. sanctions on Iranian crude oil that go into effect next month have investors worried that crude oil could top $100 a barrel. John Driscoll, chief strategist at JTD Energy Securities, said Oman oil prices spiked to $90 a barrel, a barometer for where Brent prices could go.
“It almost signaled a psychological panic-type buying,” Driscoll said. “We’re moving into a world where you have lower inventories, lower spare capacity, less protection for buyers and this kind of sent a shot across the bow.”
The sanctions could take an estimated 1.5 million barrels per day of Iranian oil out of the world markets. China, India, Japan and South Korea have indicated that they will cut purchases of Iranian oil. Sinopec already cut its imports in half. China was initially hesitant to get involved but has faced pressure from the Trump administration.
President Donald Trump’s tough words for OPEC to increase production to push prices down could have some real teeth if the No Oil Producing and Exporting Cartels Act of 2018 gains momentum.
The proposal, being kicked around in Congress, would allow the U.S. government to sue the oil cartel for limiting the production or distribution of oil and manipulating prices.
However, at its most recent meeting, OPEC ignored calls to increase production as analysts warned the world’s production is already stretched.
Qatar’s energy minister defended the oil market strategy of his country and other OPEC nations Tuesday.
“OPEC is not trying to manipulate the price. It’s trying to bring the market to balance,” said Mohammed Bin Saleh Al-Sada, Qatar’s Minister of Energy and Industry.
He added that low oil prices — like the world had through much of 2015 and 2016 — don’t equal prosperity for the world’s economy.
“That depression of the oil price led to what? (Did it) lead to a better world economy?” he asked a panel moderated by CNBC’s Geoff Cutmore at Russian Energy Week in Moscow. “In fact, there was the worst record for the global economy during that downturn in the oil price. Now, during the journey of the recovery in the oil price look what happened — balance between supply and demand has taken place, the world economy is at its best now.”
Qatar is responding to the hard line President Trump has taken on OPEC for the last several weeks.
Russian President Vladimir Putin, who also attended the Russian Energy Week conference, responded directly to Trump, blaming the Iran sanctions. Russia was part of the recent OPEC meetings.
“President Trump considers that the price is high; he’s partly right, but let’s be honest, Donald, if you want to find the culprit for the rise in prices, you need to look in the mirror,” Putin said.
Russia has the capacity to boost production by 200,000 to 300,000 barrels per day, Putin added.
As oil price and oil politics’ barometer rises, a bipartisan coalition of lawmakers is seriously considering the so-called “NOPEC” bill, claiming that Saudi Arabia, Kuwait and Nigeria are violating U.S. antitrust laws. It gives the U.S. Attorney General authority to sue countries in a district court. Senate Bill 3214 amends The Sherman Act, which broke up monopolies a century ago.
The Saudi government is said to be taking this seriously — they recently hired a lobbyist in Washington D.C. to fight the bill, report UPI.
Saudi Arabia currently produces some 10 million barrels of crude oil a day. Its record is 10.72m barrels a day.
Trump in July tweeted without evidence that Saudi Arabia would increase its production “maybe up to 2,000,000 barrels” a day.
The oil kingdom hasn’t said anything publicly, and seemed to tow the OPEC line but Commerzbank said Friday that Saudi Arabia could pump another 500,000 barrels of crude oil per day.
In other oil news, Kuwait has not exported crude oil to the United States in four weeks, the Energy Information Administration reported. Asian markets are proving to be more lucrative than the United States for the emirate.
Another area that’s expected to step up production when Iranian oil is taken out of the market is the Permian Basin in West Texas. The shale oil has been largely constrained because of a lack of pipeline infrastructure, which pushes Permian prices below WTI.
The Sunrise Pipeline will begin operating at full capacity in early November.
Plains All American LP, which built the Sunrise pipeline, has been buying up futures contracts to fill the line for years to come, which has helped push shale oil prices up.
Meanwhile, US gasoline prices are up ahead of November midterm elections in which Trump already faces political headwinds.
The average price for a gallon of regular gasoline in the US is $2.88, up from $2.55 a year ago, according to AAA and could hit almost $2.99 by Thanksgiving (last weekend of November).
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