Published: Fri, May 18, 2018
Markets | By Otis Pena

Oil: Prices heading north - Rabobank

Oil: Prices heading north - Rabobank

Oil Minister Dharmendra Pradhan said on Twitter that Saudi energy minister Khalid al Falih had assured him Riyadh and other producers would "ensure availability of adequate supplies to offset any potential shortfalls and ensure that prices remain reasonable".

Oil ministers from both the United Arab Emirates and Saudi Arabia reaffirmed on Thursday their commitment to ensure the steady supply of oil, even though the recent oil price hikes are the result of geopolitics and not fundamentally driven, according to the oil ministers as reported by S&P Global Platts.

The statement came as oil prices rose back to United States dollars 80 per barrel for the first time since 2014 due to rising concerns over disruptions to Iranian oil exports because of new U.S. sanctions and due to plummeting output in Venezuela.

Falih said he offered assurances to the Indian minister following consultations with his colleagues in Russian Federation and the United Arab Emirates, which holds the rotating presidency of the Organization of Petroleum Exporting Countries. Brent crude oil is now priced above $79 per barrel.

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Led by Saudi Arabia, the Organization of the Petroleum Exporting Countries and 10 of its partners including top producer Russian Federation have cut their crude output by a joint 1.8 million barrels a day since January 2017.

US President Donald Trump has also called on OPEC to help cool oil prices saying they were artificially high and that it was "unacceptable".

Meanwhile, the rise in the USA dollar since the start of the year may curb the purchasing power of major importing nations to buy crude, especially since many, such as India and Indonesia, no longer offer drivers such as generous fuel subsidies.

So while $80 might be Saudi Arabia's purported magic number, its spell might prove short-lived. Geopolitical concerns stemming from unrest in the Middle East to trade tensions between the United States and China, the two largest economies in the world, helped push Brent toward $80 per barrel, its highest level in almost four years if it holds.

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