EMEA News
Oil at 3-year high as Oil Producers Play Down Talk of 'Mission Accomplished'
Once more, fear and uncertainly resulting in gains for crude on Monday, with West Texas Intermediate settling up 24 cents at $68.64 per barrel, (a three year closing high), and Brent up 66 cents at $74.72 per barrel.
The trading day saw downward pressure when Bijan Zanganeh, oil minister for Iran, said that if crude continued to rise, it would be pointless to continue the Organization of the Petroleum Exporting Countries (OPEC) production cutbacks; conversely, crude was supported by fears that U.S. sanctions could quash Iran's output.
Genscape reporting an inventory decline at the Cushing, Oklahoma storage hub, was also said to have contributed to Monday's price gains.
Given that traders are hypersensitive to virtually any gossip or comment regarding the state of the industry, it's anyone's guess what the reaction could be to Mohammed bin Hamad Al Rumhi, oil minister for Oman, who dismissed recent ruminations that crude prices could escalate to $100.
He said, "I think $65 to $75 is more realistic numbers for the rest of the year, but there are so many factors that can change that," and he added, "In my opinion, where we are is not too bad and we can live with it."
Of course, the prevailing theory is that while Oman might be fine with prices as is, many Middle Eastern countries whose economies are ailing would like bigger prices and therefore are angling to extend the OPEC production cuts even further than end of this year in order to tighten the market and achieve their goal.
Such is the case with Saudi Arabia, whose oil minister, Khalid al-Falih, warned traders that dramatic upswings in crude futures was no reason to become complacent: "We have to be patient; we shouldn't jump the gun, we shouldn't be complacent and listen to some of the noise such as 'mission accomplished' - I think we still have work ahead of us."
Alexander Novak, energy minister for Russia, agreed: he told CNBC that "Undoubtedly, the situation is much better than it was three months, half a year or a year ago, but the patient has not yet fully recovered.
"To continue with the metaphor: we have brought the temperature down but we have not seen a full recovery yet."
However, Novak then said something that would doubtlessly add to trader jitters and presumably upset the Saudis, in response to being asked if Russia and other oil suppliers might abandon the OPEC cutbacks: "I cannot tell unequivocally: yes or no, this would be too blunt; we keep our options open in order to be able to take a more balanced decision based on more accurate data over a longer-term period.
"I cannot at the moment give you a precise answer because we do not have the full idea how the market is going to perform in the forthcoming months; we need to carry on monitoring the situation."
One of the benefits of the volatile crude market is that anyone can make bold predictions without being laughed at: last week Bank of America Merrill Lynch forecast that crude will breach $80 per barrel in the second quarter of this year, and industry sources told Reuters that the Saudis are plotting to achieve prices in the triple digits.
