Crude oil prices on 10 January rose further to a new 3-year high even as analysts at Citi predicts wildcards including war, Middle East tensions, Donald Trump and Kim Jong Un could drive crude toward $80 a barrel, Bloomberg reports.
OPEC’s output curbs in 2017 as well as reported declines in US crude inventories are helping fuel the upward rise in crude oil prices.
Oil price futures climbed from the highest level in more than three years after the American Petroleum Institute reported that US oil inventories tumbled by 11.2 million barrels last week. This is nearly triple the estimate in a Bloomberg survey and would be the largest draw for this time of year since 1999 if Energy Information Administration data on Wednesday confirms it, according to Bloomberg.
However, analysts at Citi are forecasting that U.S. President Donald Trump’s focus on geopolitical risks, with his pursuit of sanctions on Iran and North Korea has potentially significant consequences for oil prices; Bloomberg cites Citi’s report.
“That’s in addition to political disturbances in some OPEC members like Iraq and Libya that could see crude supplies decline, boosting oil to levels between $70-$80, Citi stated in its January 9 report.”
“Many of these uncertainties have significant consequences for commodities,” Citigroup analysts including Ed Morse wrote in the report titled Wildcards for 2018:
Trump looms large along with systemic risks. “It is not a surprise that our list of potential wildcard events in the year ahead retains a focus on the United States.”
Brent, Nigeria’s flagship crude brand, for March settlement climbed as much as 44 cents, or 0.6 percent, to $69.26 a barrel on the London-based ICE Futures Europe exchange after advancing 1.5 percent on Tuesday to the highest since December 2014. The global benchmark crude was at a premium of $5.80 to March WTI
West Texas Intermediate crude oil price for February delivery rose as much as 61 cents to $63.57 a barrel on the New York Mercantile Exchange, and was at $63.42 at 10:19 a.m. in London. Total volume traded was about 27 percent above the 100-day average. Prices advanced $1.23 to $62.96 on Tuesday, the highest close since December 2014.
But rising shale production in the US remains a downside risk to prices. OPEC bid to curb excess supply in the market is facing the challenge of rising U.S. crude output, which the EIA expects to rise above 10 million barrels a day as soon as next month, eventually topping 11 million in November 2019.
“It is not completely unexpected given the price momentum,” Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt, said of oil’s latest gains. But “the shale rebound is also for real” and there’s a risk of a “massive price slump.”
However, OPEC members are said not to be keen on Brent prices staying above US$60 a barrel because of the potential for more shale output, Iran’s Oil Minister Bijan Namdar Zanganeh said, according to the ministry’s news service Shana. This could indicate that OPEC could slow down on its supply curbs if crude oil prices continue to stay above US$60 per barrel.
