Trump, Saudi King meet over oil market stability

Kenny Grant
October 3, 2018

US oil prices hit their highest level since November 2014 and Brent crude was also near a four-year peak reached the previous day, with markets preparing for tighter supply once USA sanctions against Iran kick in next month.

Brent crude, against which Nigeria's oil is priced, increased by $1.59 to $84.32 per barrel as of 6:30pm Nigerian time, while US West Texas Intermediate rose by $1.67 to $74.92 per barrel. WTI has risen around 18% since mid-August.

The recent increase in oil prices has raised hopes that crude could reach $100 per barrel for the first time since prices slumped in mid-2014, when Brent peaked at $115 per barrel. That's the highest level since November 2014.

This week, Trump again said he wasn't happy with OPEC, Middle East nations and oil prices, asserting that the producer group was causing prices to rise while benefiting from protection of the US military. Some market players are predicting the new US-Canada-Mexico free-trade deal will spur more demand.

"U.S. (fiscal) tightening, higher oil prices and ongoing trade frictions are all taking their taking their toll on the growth outlook", HSBC said. Analysts say prices likely will go higher as American sanctions on Iran resume in November.

According to OPEC, the crude oil market is well supplied now and there is not any need for further production increase.

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"Iran has attempted to downplay the impact of looming US sanctions by claiming that it has no intention of reducing oil production".

U.S. President Donald Trump called Saudi Arabia's King Salman on Saturday and they discussed efforts being made to maintain supplies to ensure oil market stability and global economic growth, Saudi state news agency SPA reported.

"Against this backdrop of dwindling Iranian oil supplies, the focus will turn to meek levels of global, or more accurately, Saudi spare capacity", Stephen Brennock of PVM Oil Associates said in a note, according to CNBC.

Several major buyers in India and China have signaled that they will cut purchases of Iranian oil.

"Already at $80, we are seeing emerging-market local oil prices pretty close to where we peaked a few years ago. the race to protect consumers from further price rises from here could potentially impact demand growth sooner than would otherwise have been expected", Hansen said. Elsewhere, exports look set to continue its plunge with China's top refiner, Sinopec, looking to halve its oil imports from Iran to around 130k bpd.

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