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OPEC, Russia rebuff Trump's call for immediate boost to oil output

24 September 2018

Iran itself faces the prospect of much lower oil exports and output in coming months due to fresh US sanctions. The meeting concluded without any decision to increase oil production, a departure from the organization's commitment in June to hike supply of the commodity.

Supply to the global oil market remains "satisfactory", Saudi Arabia's energy minister Khalid al-Falih said on Sunday, after calls by US President Donald Trump for an immediate hike in output to reduce prices.

Trump has been calling publicly for OPEC to help lower prices by producing more. Trafigura Group co-head of oil trading Ben Luckock sees $90 oil by Christmas and $100 in early 2019.

Saudi Arabia successfully negotiated limits on oil production 18 months ago in an effort to get oil prices higher and boost government coffers, which had suffered from an extended period of cheaper oil.

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Brent crude hit its highest since May at $80.47 per barrel, up $1.63 or more than 2 per cent, before easing back slightly to around $80.40 by 0730 GMT. per cent light crude was $1.18 higher at $71.96.

"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. That suggests OPEC's power to influence the market will be tempered by USA production for about another decade.

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OPEC and other oil producers are considering raising output by 500,000 bpd to counter falling supply from Iran.

While viewing high demand as healthy, the organisation noted that the trend was fuelled by developing countries undergoing major demographic and general economic expansion.

Sales of Iranian crude have fallen as buyers remain wary of penalties from sanctions due to take effect from November.

This, the official added, would not change given that Russia's production would decline over the cold months of the year. "We in Saudi Arabia have not seen demand for any additional barrel that we did not produce".

Rising crude prices is always bad for oil retailers as it is a raw material for them and aviation companies as oil is a major part of their operational expenses.

What may be happening is that physical oil consumers, such as refiners, are locking in supplies further along the curve in anticipation of price rises, while the front-end of the paper markets are being driven higher by investor flows seeking to take advantage of increasing media coverage of a tighter market.