Oil to Hit $100 if Supply Crunch Worsens
By Saghir Aslam
Rawalpindi, Pakistan
(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the Ummah will benefit from this effort through greater financial empowerment, enabling the community to live in security and dignity and fulfill their religious and moral obligations towards charitable activities)
Oil rebounded to $73 a barrel on Wednesday after falling to its lowest since August, supported by a report that Russia and Saudi Arabia are discussing oil output cuts in 2019.
Oil prices hit $71.18 on Tuesday, its lowest since August 16, after the US granted sanctions exemptions to top buyers of Iranian oil, but experts warned that it could touch $ 100 if supply crunch worsens.
Brent crude, the global bench-mark, rose $1.04 to $73.17 a barrel by 1057GMT on Wednesday. US crude rose 68 cents to $62.89.
An average price of $ 80 a barrel for this quarter is realistic, with spikes to $90 or even $100 possible if further disruptions worsen a supply crunch amid rising consumption, Citi’s Global Head of commodities Research Ed Morse Said.
The sanctions exemptions from the US, although widely expected, lifted supply concerns and turned the markets focus to worries that an economic slowdown may curb fuel demand.
Citigroup’s analyst said oil prices are likely to be “biased to the upside” for the rest of the year as demand from refineries rises in November and December.
The outlook comes as the Opec and its allies send mixed supply signals to the market, with Russia suggesting it could push output to a record and an Opec committee signaling the group could cap supply again in 2019. Central to the uncertainly is Iran, where the US imposed sanctions this week while granting waivers to eight buyers of its crude. Experts expect Iran’s crude exports would fall to little more than one million barrels per day (bpd) in November, roughly a third of their mid 2018 peak. But trades and analysts say that figure could rise from December as importers use their waivers.
Washington gave 180-day exemptions to eight importers-china, India, South Korea, Japan, Italy, Greece, Taiwan and Turkey. This group takes as much as three-quarters of Iran’s seaborne oil exports, trade data shows, meaning Iran will still be allowed to export some oil for now.
Supply disruptions can also be expected elsewhere, including in Opec nations Nigeria, Libya and Venezuela. In Nigeria, where elections are coming up, “there are always disruptions and they average about half million barrels a day, Morse.
Concerns about demand continue amid escalating trade dispute between the US and china as currency weakness continues to pressure economies in Asia, including India and Indonesia.
“The Market continues to shift from worrying about tightening supplies to acknowledging upside supply risks and weakening demand growth”.
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, nor does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr Aslam does not have anything for sale.)
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