Americas News
BP Joins Analysts Worrying About Iran Impact, but Goldman Dismisses Talk of $100/bbl Oil
From the Organization of the Petroleum Exporting Countries' (OPEC) perspective, their decision not to increase crude production was based on current global crude markets being healthy and that the taps can be turned on fuller if the U.S. sanctions against Iran prove to be devastating; but this didn't prevent the analytical community on from rekindling old fears of $100 per barrel oil.
Bloomberg reported that the total number of options traded on Brent crude "surged on Monday to about 274,000 contracts, the highest ever, data showed."
The surge was was driven by record call trading, including bets on $100 per barrel or more, as the global benchmark reached an almost four-year high and major trading houses such as Mercuria Energy Group Ltd. and Trafigura Group predicted the return of triple digit crude for the first time since 2014.
Bob Dudley, CEO of BP, agreed that the loss of Iranian barrels could indeed cause crude to rise briefly to $100 per barrel: "I'd like to think that's not what's going to happen; there's a lot of uncertainty and volatility in the next month."
Dudley said that oil prices already "feel high to me," and he believed there would be bigger impact from the Iran oil sanctions than those resulting from the Barack Obama administration, which allowed nations to continue purchasing at reduced levels.
Helima Croft, global head of commodity strategy for RBC Capital Markets, told CNBC on Tuesday that there could be a significant hole in the crude market without Iranian oil, and that China "will likely be the only purchaser in significant volume."
She went on to say that "the real challenge though for OPEC going forward and for President Trump is there's not a lot of gas in the tank; Saudi Arabia is about 320,000 barrels away from their 2016 pre-cut high, and there's a question mark about how much more they can really do beyond that in the near term"; Croft added that the need for increased output also comes at a time when the U.S. is facing bottleneck problems in production.
About the only analytical body of note that earned headlines on Tuesday for not buying into the notion of oil in the triple digits was Goldman Sachs, whose analysts stated in a note that "another supply catalyst beyond Iran would likely be needed for prices to meaningfully break to the upside."
Goldman's Damien Courvalin and Jeffrey Currie pointed out that production from other OPEC producers and Russia will offset Iranian losses out of Iran, and that any big price hike ahead of U.S. elections will likely prompt Washington to authorize a release from the country's strategic reserves.
They concluded, "As a result, we expect Brent prices to stabilize back in their $70-80/bbl range into year-end."
Presumably, renewed talk of $100 oil baffled Khalid al Falih, energy minister for Saudi Arabia: earlier this week he pointed out that "There is plenty of supply to meet any customer that needs it; I don't know of any refiner in the world who is looking for oil that hasn't been able to get it."
