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Page added on September 12, 2018

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Oil Hovers Near $80 A Barrel As Concern Grows Over Global Supply


Oil eased on Wednesday, having neared its highest level this year after a drop in U.S. crude inventories and the prospect of the loss of Iranian supply added to concerns over the delicate balance between consumption and production.

Brent crude futures were last down 23 cents on the day at $78.83 a barrel by 0923 GMT, having touched a session peak of $79.66, the highest since late May, when the price broke above $80.

U.S. crude futures were up 35 cents at $69.60 a barrel.

“We think oil market fundamentals are increasingly supportive of crude prices, at least at current levels,” said Gordon Gray, HSBC’s global head of oil and gas equity research.

“While we aren’t explicitly forecasting Brent to rise to $100 a barrel, we see real risks of this happening. The fact that much higher supply is already needed from the likes of Saudi Arabia – and the low levels of spare capacity remaining – leave the global system highly vulnerable to any further significant outage.”

U.S. crude stocks fell by 8.6 million barrels in the week to Sept. 7 to 395.9 million, the American Petroleum Institute (API) said on Tuesday, while the U.S. Energy Information Administration (EIA) cut its forecast for U.S. crude output growth in 2019.

Outside the United States, traders have been focusing on the impact of U.S. sanctions against Iran that will target oil exports from November.

“Iran is increasingly becoming the preoccupation of the crude market. The last couple of weeks have seen the expected squeeze on Iranian crude flows taking shape, with overall outflows down markedly,” consultant JBC Energy said.

“Fragile” Market

Russian energy minister Alexander Novak on Wednesday warned of the impact of U.S. sanctions against Iran.

“This is a huge uncertainty on the market – how countries, which buy almost 2 million barrels per day of Iranian oil, will act. The situation should be closely watched, the right decisions should be taken,” he said.

Novak said global oil markets were “fragile” due to geopolitical risks and supply disruptions.

Should markets overheat and prices spike, however, Novak said Russia could increase its output.

“Russia has the potential to raise production by 300,000 barrels (per day) mid-term, in addition to the level of October 2016,” he said.

That month Russia produced 11.247 million bpd, a post-Soviet Union record-high.

Oil markets were also watching Hurricane Florence offshore the United States amid surging demand for gasoline and diesel, although crude output will not be affected on the storm’s current route.

The storm is expected to make landfall on the U.S. East Coast on Friday.


14 Comments on "Oil Hovers Near $80 A Barrel As Concern Grows Over Global Supply"

  1. dave thompson on Wed, 12th Sep 2018 3:01 pm 

    How can we be worried about Oil supply when we are in the midst of the energy “transition”?

  2. makati1 on Wed, 12th Sep 2018 7:06 pm 

    dave, what “transition”? Do you mean back to muscle power? That is the only possible direction for the 7+ billion of us.

  3. dave thompson on Wed, 12th Sep 2018 8:10 pm 

    Mak I am being a bit of a snark.

  4. makati1 on Wed, 12th Sep 2018 8:16 pm 

    Sorry dave, I missed the sarcasm. Need my 2nd cup of coffee, I guess. 9:15 AM here.

  5. tahoe1780 on Thu, 13th Sep 2018 9:25 am 

    MAK, Hope you’re out of harm’s way.

  6. Davy on Thu, 13th Sep 2018 11:51 am 

    2018 Typhoon Mangkhut

  7. deadly on Thu, 13th Sep 2018 12:14 pm 

    The hotel motel business is booming in places inland of the eastern seaboard at the Carolinas.

    The hurricane eye is located at approximately 33 degrees North and 75 degrees West. On Monday Tuesday the coordinates were near 27 degrees North and 67 degrees West.

    36-48 hours later, Florence has traveled about 600 miles west and some 400 miles north.

    The mainland is somewhere at 79-80 degrees West at South Carolina to North Carolina.

    5 times 66 nautical miles per degree of longitude is 330 miles to go for the now weakening eye of the hurricane to reach landfall.

    It is going to make haste all the way to the eastern seaboard which will then get everyone’s attention. No doubt about it.

    The Outer Banks of North Carolina is at 35 degrees North and 75 degrees West, so the eye of the hurricane is about 132 nautical miles due south of the Outer Banks.

    By tomorrow morning, the hurricane is going to be a force to be reckoned with.

    100 mph hurricane winds will do some damage.

    The mainstream media will be there.

    After the hurricane, it’ll be back to the wars.

    Moving further west, the Colorado Basin is in full view from space and the sky is clear.

  8. makati1 on Thu, 13th Sep 2018 7:15 pm 

    tahoe1780, yes, I am south of the typhoon’s path by about 200 miles. We will get some extra rain but not much more. Thanks for asking. I am glad I am not in South Carolina this weekend.

  9. rockman on Fri, 14th Sep 2018 12:41 pm 

    Interesting how some folks seem to take $80/bbl price as returning to the “new normal”. It’s far from that. Prior to the post 2008 price boom the last time prices were at $80/bbl or higher (inflation adjusted, of course) was 35 years ago in 1983. They don’t seem able to grasp the reality that the global economy has been dealing with the POD (Peak Oil Dynamic) for more then 4 decades. Whether they understood the nature of peak oil or not. As explained many times before the Rockman’s first mentor at Mobil Oil in 1975 explained the coming global PO in great detail. So far pretty much as he predicted. Just one of the reasons the Rockman rolled into retirement last January with no debt…including no home mortgage.

  10. Anonymous on Fri, 14th Sep 2018 9:19 pm 

    ND up 40,000 bopd. Set another record.

  11. twocats on Fri, 14th Sep 2018 10:00 pm 

    that’ll get ‘er

    world production has been bumping along since 2015. let’s see if these high prices knock it to the next level. It’s possible. but it could also be a lot of talk.

  12. Anonymous on Fri, 14th Sep 2018 10:25 pm 

    Just look at the peak oil graphic that is the icon at the top of this article. That is from 2004 and was a peak oil prediction. They thought we would be DOWN about 10 million bopd. Instead we are UP 10 million.

  13. rockman on Sat, 15th Sep 2018 2:25 pm 

    A – “They thought we would be DOWN about 10 million bopd. Instead we are UP 10 million.” Exactly: just another extremely obvious example of the POD and why debating global PO dates is such a ridiculous waste of time. The situation is much more complicated.

  14. Anonymous on Sat, 15th Sep 2018 4:55 pm 

    Well of course it is. And it’s a fascinating story to watch and discuss and analyze. For instance see slides 11, 12, 15, 16, 17, 19, and 21 of the attached presentation:

    But the “analysts” at TOD and ASPO have run off when the boys came out to play because they are so embarrassed at being wrong. It’s actually not the end of the world to be wrong. But their actions show that they were biased and that their interest was not in true analysis of the trends but just in cheering for one particular outcome.

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