Published: Wed, October 03, 2018
Markets | By Otis Pena

Oil rises to 2014 highs on Iran sanctions, Nafta deal

Oil rises to 2014 highs on Iran sanctions, Nafta deal

Citigroup Inc. has a warning for USA oil investors: American crude prices may tumble to the steepest discount against global benchmark Brent since 2013.

The recent increase in oil prices has raised hopes that crude could reach $100 per barrel for the first time since prices slumped in mid-2014, when Brent peaked at $115 per barrel.

According to EIA, weekly estimate of the USA oil production increased by 100,000 barrels per day at 11.1 million barrels per day.

Latest Reuters survey shows falling Iranian imports weigh on oil production.

According to OPEC, the crude oil market is well supplied now and there is not any need for further production increase.

LONDON, Oct 1 (Reuters) - Hedge fund managers are increasingly betting Saudi Arabia and its allies can not or will not replace all the crude lost from the market when US sanctions on Iran go into effect fully from November.

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OPEC tends to react to price changes rather than lead them (which is why its influence over the oil market is usually overstated by many commentators). USA light crude futures were up $1.13 at $74.34 a barrel, also the highest in almost four years. It should be noted that the call to reduce oil prices comes from a major exporter, as USA oil production is booming at record levels with exports surpassing most OECD countries. It also reported a build of 1.53 million barrels in total gasoline inventories, while the market was expecting a draw of 100,000 barrels.

Brent crude in London rose as much as 0.6 percent, after ending the previous quarter 4.1 percent higher. A touted tool to lower oil prices was for the USA to tap into its emergency oil reserves in order to provide ample supply, however, the energy secretary had ruled this out due to the limited impact that this would have on reducing prices. In the shale-rich Permian Basin of West Texas and New Mexico, the tally dropped by two to 486.

In the last few weeks, however, oil prices have been climbing, with the gains attributable a number of factors, according to Jeff Klearman, portfolio manager at GraniteShares, a New York-based exchange-traded fund issuer.

On Friday, WTI and Brent prices settled 1.48 percent and 1.45 percent higher, respectively.

In the oil market, balance is a hard game.

"We forecast well over 1 million bpd in global surpluses next year. even that may be too small, as emerging market currency collapses may harken a big emerging market growth slowdown next year", said Rapidan Group president Bob McNally.

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