Oil prices were up on Thursday as investors considered the expected global crude shortfall as the Trump administration’s sanctions against Iranian crude exports near. Total photo.
Oil prices rise ahead of US midterm elections
On Thursday, oil prices rose as a jittery market grew more concerned about a possible crude supply shortage as the date for the reimposition of US sanctions on Iranian oil exports nears.
Speaking at the United Nations on Monday, US President Donald Trump demanded that OPEC increase its production to stave off rising oil prices prior to the contentious midterm elections.
“The market continues to move higher on fears that the loss of Iranian exports is not going to be made up,” Gene McGillian, director of market research at Tradition Energy, told Reuters.
According to analysts, OPEC and Russia are not expected to increase their production, despite Trump’s demand. US Energy Secretary Rick Perry says he has ruled out using US strategic oil reserves to cut oil prices.
By 3:19 p.m., EDT, Brent crude futures prices rose 61 cents to $81.40/barrel and US West Texas Intermediate futures climbed 66 cents to $72.23/barrel. The Canadian Crude Index rose 40 cents to $38.64.
“On paper, you could argue that the technical and fundamental perspective points to higher prices, so I think that will carry on into next week and further out,” Saxo Bank senior manager Ole Hansen told Reuters.
But Hansen said he was “struggling to see” oil prices reaching $100 a barrel.
“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.
However, Japan’s Mitsubishi UFJ Financial Group wrote in a note to clients that market risks “are heavily skewed to the upside and whilst we are not explicitly forecasting Brent to rise to $100 per barrel, we see material risks of this coming to fruition.”
It is unknown how much US sanctions on Iranian crude exports will have on the market with estimates varying from 500,000 barrels per day (b/d) to 2 million b/d. Iran is OPEC’s third-largest producer.
Saudi Arabia is expected to increase its production by 500,000 b/d to offset the drop in Iranian exports, but the kingdom is worried that it may need to take action to cut production should US output continue to grow.