OPEC and Russian Federation rule out immediate output boost

People walk past a billboard for the 10th meeting of the OPEC Joint Ministerial Monitoring Committee in Algiers Algeria. — Reuters

People walk past a billboard for the 10th meeting of the OPEC Joint Ministerial Monitoring Committee in Algiers Algeria. — Reuters

The United States has sent mixed messages to OPEC and its allies over the last week about whether they need to do more to raise oil production and hold down prices.

A source familiar with Opec discussions told Reuters on Friday that Opec and other producers have been discussing the possibility of raising output by 500,000 bpd.

As new U.S. sanctions against Iran come into force on November 4, importers would find it harder to buy oil from Tehran. However, the Saudis face another challenge which is to appease President Donald Trump while keeping the Kingdom's vision together of a major alliance between crude oil producers.

Total supply from outside of the Organization of Petroleum Exporting Countries will surge by 8.6 MMbpd from 2017 to 2023, to 66.1 MMbpd.

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Last week, Trump said that OPEC "must get prices down now!", but Iranian Oil Minister Bijan Zanganeh said on Monday OPEC had not responded positively to Trump's demands.

Bank of America's main scenario is for oil prices next year of around US$80 a barrel, according to the note. "Since June, Saudi Arabia has met the demand for every barrel that has been requested", its oil minister, Khalid al-Falih, said.

Alexander Novak, energy minister for the former Soviet Union, said his country is ready to hike its oil output after the implementation of USA sanctions on Iran: "I don't think we can discuss the exact number at this point but what I can tell you for sure is that we have significant potential to increase our production". Over the weekend, the OPEC Joint Technical Committee ended without any commitment to increase production.

With Brent crude already jumping to an nearly four-year high on Monday, that's exactly the kind of price surge President Donald Trump has been seeking to prevent by pressuring the Organization of Petroleum Exporting Countries to raise production.

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"Saudi Arabia and Russian Federation confirmed that they are not raising output-and this is bad news for President Trump as he wants a lower oil price that is good for business", said CMC Markets David Madden. USA light crude CLc1 settled up $1.30, or 1.8 percent, higher at $72.08.

Falih said Saudi Arabia has spare capacity to boost output but that this action was not necessary for now, and might not be needed next year because OPEC projects there will be a marked rise in oil production from non-OPEC countries which could outpace global demand.

Hedge funds and other money managers raised their combined net long position in the six most important petroleum contracts by just 3 million barrels to 1.049 billion barrels.

Now, however, Iran's OPEC governor, Hossein Kazempour Ardebili, said, "If there is a fall not only from Iran, but anybody else, it is the responsibility of OPEC and non-OPEC to balance the market".

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Mihir Kapadia, of Sun Global Investments, said: "With Brent crude already above $80.50 per barrel, we can expect the oil markets to close at early $90s by the end of the year and touch $100s by March 2019".

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