Oil prices surged early Monday in New York, extending an uptrend for crude, as major energy producers declined to commit to increasing crude output to address expected supply disruptions at a closely watched producer meeting.
November West Texas crude CLX8, +1.65% traded $1.30, or 1.8%, higher at $72.07 a barrel, on the New York Mercantile Exchange, following a weekly gain of more 2.6%.
Global benchmark November Brent LCOX8, +2.39% rose $1.86, or 2.4%, to reach $80.10 a barrel on the ICE Europe exchange, following a weekly advance for crude of 0.9%.
Members of the Organization of the Petroleum Exporting Countries and nonmember crude producers over the weekend in Algiers delivered no formal plan to boost output to offset an estimated 2 million barrels a day of oil that will be lost due to U.S. sanctions on Iran’s exports set to take effect Nov. 4.
“I do not influence prices,” Saudi Energy Minister Khalid al-Falih told reporters in Algeria, according to Reuters. The report indicated that no plan was established to lift output, suggesting that the cartel and its members may be willing to let prices run higher.
Oil prices have been on the rise, boosted in part by President Donald Trump’s decision to pull out of the Iran nuclear accord and renew sanctions on the country, which are aimed at sharply curtailing the major producer’s exports.
Already, Iranian exports have fallen by around 500,000 barrels a day between April and August, according to the International Energy Agency.
OPEC and non-OPEC producers had agreed in June to boost production by 1 million barrels a day in an effort to get output nearer to a previously agreed ceiling. Headed into the Algiers meeting, there was speculation that an additional output increase of 500,000 barrels a day would be implemented to address shrinking supplies from Iran.
“The next big resistance level for Brent will be offered at the 61.8% retracement versus [$]81.93 [a barrel] (115.71 from June 2014 versus the 27.29 low from January 2016). WTI traded to a two month plus high of 72.39 last night, but is still well below the four-year high of 75.27 from July,” wrote Robert Yawger, director of energy at Mizuho U.S.A., in a Monday research note.
Elevated crude prices have grabbed the attention of Trump, who tweeted last week that OPEC “must get prices down now.”
According to The Wall Street Journal, energy ministers in Algiers were unable to strike an accord on how best to allocate any increases in production to help address Iranian shortfalls.
Talks also were complicated by the inequalities inherent in OPEC, notably, between producers, like Saudi Arabia and Russia, who can easily ramp up output, and smaller nations that would benefit from higher prices but can’t easily boost production levels.
Ultimately, the weekend’s convention in Algeria concluded with producers saying that they would adhere to production quotas to which they agreed in late 2016.
In any event, some market participants doubt that OPEC and non-OPEC members would be able to keep prices in check.
“The market does not have the supply response for a potential disappearance of 2 million barrels a day in the fourth quarter,” said Daniel Jaeggi, co-founder of Mercuria Energy Group Ltd., in a recent speech at the S&P Global Platts Asia Pacific Petroleum Conference.
“In my view, that makes it conceivable to see a price spike north of $100 a barrel.” Bloomberg News reported.
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