The NOPEC legislation is shaping up to be the next big issue that could affect trading behaviour: File Image/Pixabay
As was the case in the previous trading session, crude on Tuesday enjoyed modest price gains on the lingering strength of an unnamed official from Saudi Arabia saying his kingdom will cut its oil exports next month.
And in an indication that analysts are casting about for something new to worry about instead of just U.S./China relations and Venezuela, the notion that U.S. legislation against the Organization of the Petroleum Exporting Countries (OPEC) would create price chaos was discussed.
Brent on Tuesday rose 9 cents to settle at $66.67 per barrel, while West Texas Intermediate crude rose 8 cents to settle at $56.87 per barrel, fortified by the Saudi official on Monday stating that April exports would drop below 7 million barrels per day (bpd), while output would be maintained well below 10 million bpd.
Bob Dudley, CEO, BP
I don't know, you can never predict the price of oil
Supporting prices as well was news on Tuesday that the United Arab Emirates in February exceeded its OPEC target for oil output cuts, achieving 119 percent of its goal, according to the country's energy minister.
Another disclosure on Tuesday may presumably further calm fears that the world is awash with too much oil and too little demand: the Energy Information Administration said that American crude production is expected to grow more slowly than previously anticipated in 2019, averaging about 12.3 million bpd.
This prompted John Kilduff, founding partner at Again Capital, to remark, "Part of the push-back against OPEC+ efforts has been this idea of unrelenting growth in U.S. oil production, primarily shale; the EIA report reined some of that in, and the report was supportive in that respect."
For once, media seemed to relegate geopolitical tensions on the back pages and instead focused on an issue that up until now has been given cursory coverage: the No Oil Producing and Exporting Cartels Act, or NOPEC, legislation that would make it illegal under U.S. law for foreign nations to work together to limit fossil fuel supplies and set prices.
Bob Dudley, CEO of BP, credited OPEC for playing a critical role in stabilizing world oil prices, and he remarked that "the idea of opening global litigation against the OPEC countries has enormous unpredictable, unintentional consequences."
He warned that if NOPEC is passed, passed, "you'll end up with enormous overproduction and crashes in the price; then it will come back up and then it will soar because there's been under-investment."
David Goldwyn, chairman of the energy advisory board at the Atlantic Council, agreed, adding, "If that happens, it's a risk to anyone with assets in the U.S."
As for the state of the crude market in 2019, Dudley went on to remark that it will continue to be uncertain: "There's obvious geopolitical uncertainty -- Venezuela's a real human tragedy, production's off in Libya; I think you can feel a tightening in the market right now.
"The U.S. has to make decisions on whether to extend the sanctions to Iran or not; I mean, all those things could make it a volatile year, [and] if things stand the way they are now, I think we'll end up in this fairway of, you know, I say $60-$65, it might be $50 to $70 this year and I think that's healthy for the oil industry - but I don't know, you can never predict the price of oil."