Tokyo: Oil is heading for the longest run of weekly gains since January on concern that higher Saudi and Russian output may not ease a supply crunch as impending U.S. sanctions squeeze Iranian exports. Futures in New York climbed as much as 0.8 percent, on course for a fourth weekly gain. Prices may hit $100 as soon as this fall given all the uncertainty over Iran, Russian Energy Minister Alexander Novak told radio station Business FM. Still, Saudi Energy Minister Khalid Al-Falih said “We’re doing everything we can," signaling the kingdom is ready to mitigate a potential loss of supply from the Persian Gulf state.
Oil is near the highest level in four years as Iranian shipments drop, production in Venezuela falls due to an economic crisis and a pipeline bottleneck deters inland American supply from reaching export terminals on the coast. While Saudi Arabia and Russia signalled they may pump more amid growing pressure from U.S. President Donald Trump, doing so could reduce the world’s spare production capacity to historically low levels.
“As it’s very difficult for Saudi Arabia and Russia to drastically increase supply, the oil market will likely tighten unless global economy gets worse and demand falls," said Tetsu Emori, the president of Emori Capital Management Inc. Even if the Saudis and Russians boost production, concerns over spare capacity may raise oil prices further, he said.
West Texas Intermediate for November delivery advanced as much as 60 cents to $74.93 a barrel on the New York Mercantile Exchange and traded at $74.80 at 12:02 p.m. in Tokyo. The contract fell $2.08 to $74.33 on Thursday. Prices are up 2.1 percent for the week. Total volume traded was about 50 percent below the 100-day average.
Brent for December settlement rose 38 cents to $84.96 a barrel on the London-based ICE Futures Europe exchange. The contract declined $1.71 to $84.58 on Thursday. Prices are up 2.7 percent for the week. The global benchmark crude traded at a $10.25 premium to WTI for the same month.
Novak is not alone in predicting prices may return to three-digit levels last seen in 2014. Trading giant Mercuria Energy Group Ltd. said last week Brent may spike over $100 in the fourth quarter and Trafigura Group expects it in early 2019. While Goldman Sachs Group Inc. isn’t that bullish, the Wall Street bank sees a risk of oil holding above $80 toward the end of the year.
Meanwhile, investors have shrugged off news that Russia and Saudi Arabia are now producing an extra 1 million barrels a day after the Organization of Petroleum Exporting Countries and its allies struck a deal in June to ease output limits.
Russia, which already broke its post-Soviet production record last month, could add another 200,000 to 300,000 barrels a day of supply within a “few months," Novak said. Saudi Arabia is ready to fully utilize its spare production capacity, Energy Minister Al-Falih said on Thursday, following the U.S. State Department’s unusual request to tap the kingdom’s supply buffer.
Other oil-market news Saudi Arabia raised pricing for all oil grades for November shipments to Asia and the Mediterranean region. An additional 1.7 million barrels of oil were stowed in tanks at a key U.S. pipeline hub in Oklahoma in the five days to Oct. 2, data provider Genscape Inc. was said to have reported. U.S. crude inventories rose 7.98 million barrels last week, the biggest gain since March 2017, the Energy Information Administration reported on Wednesday.