Oil prices jumped on Monday in immediate reaction to a crucial decision by Opec and allies not to boost output urgently, rebuffing US President Donald Trump's call to increase production amid restricted Iranian crude exports and tightening global supply.
Somebody is going to be wrong on the outlook for the crude oil price, as the market can not be well-supplied and increasingly tight at the same time.
"We expect that those Opec countries with available spare capacity, led by Saudi Arabia, will increase output but not completely offset the drop in Iranian barrels", said Edward Bell, commodity analyst at Emirates NBD bank.
The threats of disruption as well as the early supply cuts have helped to lift Brent crude futures to almost $80 a barrel this month, a level not seen since 2014.
For all these urgent supply pressures, the world's largest oil producers adopted a sit-back-and-wait approach at their meeting in the Algerian capital on Sunday.
The Organization of the Petroleum Exporting Countries and non-OPEC states, including top producer Russian Federation, gathered in Algiers on Sunday for a meeting that ended with no formal recommendation for any additional supply boost to counter falling supply from Iran.More news: Sleep in coffin for 30 hours, earn $300 in creepy contest
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This time, the deepening trade war between the USA and China threatens economic growth in Asia and turmoil in emerging countries could amplify the impact of higher prices on global demand growth.
Meanwhile, China's oil imports from Iran reportedly plunged by around 250,000 barrels per day (bpd) in August compared to a month earlier, though Beijing signaled its intent to keep buying.
"If they kept quiet, the prices would be cheaper, I am confident about that", he added. US light crude CLc1 was $1.30, or 1.7 percent, higher at $72.08. "As a result, significant EM oil demand destruction could follow if Brent crude oil spikes above $120/bbl".
The U.S., which isn't an OPEC member and has in recent years seen a renewed boom in shale oil, will continue to grow as a crude producer, peaking in the late 2020s. Trafigura Group co-head of oil trading Ben Luckock sees $90 oil by Christmas and $100 in early 2019. Money managers' wagers on higher Brent crude prices are having their longest streak since November 2017, according to ICE Futures Europe data.
At press time, Brent's front-month contract $79.47 per barrel, up 1.57 percent on the day.