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Brent surges above $80 to its highest level since November 2014

By A/S Global Risk Management.



Michael Poulson, Senior Oil Risk Manager at Global Risk Management. Image credit: A/S Global Risk Management


Updated on 25 Sep 2018 08:14 GMT

Brent surged above $80 a barrel to its highest level since November 2014 as OPEC+ signaled less urgency to boost output during this weekend's meeting. This was the outcome despite U.S. pressure to temper prices.

At the summit, the Saudi Arabian energy minister signaled that the kingdom is in no rush to bring oil prices down from current levels and added that "The market is well-supplied". This statement comes an a time where a lot of Iranian crude oil barrels are already off the market and more are expected to go as the sanctions kick in. Some market participants are pointing towards a decrease of as much as 1.5-2 mbpd with prices between $90 and $100 early 2019.

The market was apparently expecting Saudi Arabia and Russia as well as other OPEC members to offset missing barrels from Iran and Venezuela, and partly they did. Libya's oil production has climbed to 1.278 million barrels a day - the highest level since 2013. If this is sustained for the entire month, the overall OPEC increase is of 600,000 barrels a day since June. Fundamentally speaking, the current supply capacity does not point towards a tight market. But as Saudi Arabia does not see a need to increase supply, the market could easily get tighter as November closes in.

All together, this weekend's meeting disappointed the expectations of Iranian missing supply being offset, which likely brought the bulls out. Furthermore, there was a terrorist attack in an oil-rich region, Iran, which could also influence the latest price spike. Either way, oil prices are likely heading for increased volatility in the time to come.



A/S Global Risk Management is a provider of customised hedging solutions for the management of price risk on fuel expenses. The company has offices in Denmark and Singapore. For further details about its risk management products and services, please call +45 88 38 00 00 or email hedging@global-riskmanagement.com.






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