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Oil Surges Above $75 in NY as Supply Outages Outpace OPEC

Oil Surges Above $75 in NY as Supply Outages Outpace OPEC

Trump wants Saudi Arabia to increase its oil production to offset any lost supply because of what is happening around Iran and the political chaos in Venezuela.

Trump again accused the Organization of the Petroleum Exporting Countries of driving fuel prices higher on Wednesday, and urged USA allies such as Saudi Arabia to pump more if they wanted Washington to continue protecting them against their top foe Iran.

Barely a week after OPEC's decision to ramp up oil supplies, Trump surprised the world on Saturday by announcing a new side agreement with the Saudis to compensate for supply shortages from two crisis-hit producers, Iran and Venezuela.

Kazempour's defense of OPEC came one day after Trump took to Twitter to attack the organization for its inaction on rising oil prices.

On Tuesday, Morgan Stanley raised its Brent forecast to US$85 per barrel, from US$77.5, citing concerns that the United States may succeed in blocking much of Iran's 2.7 million barrels per day. It has made similar threats in the past, prior to the 2015 nuclear deal. However, summer months in the US usually lead to increased demand for oil, boosting the price of gasoline in a midterm election year.

Brent crude futures were at $78.12 a barrel at 1050 GMT, down 12 cents.




"Donald Trump's call on other countries to stop buying crude oil from Iran and putting European companies under pressure with Nigeria and Libya being crisis-stricken, Venezuela's crude oil output having plunged and Saudi Arabia's consumption increasing due to summer, would be a kind of self-harm for the United States as it would lead to dramatic price hikes in the oil market", Ardebili said. "We are also on this highway".

He said oil sector contracted by 1.6 per cent a year ago mainly because of the Opec mandate that saw the UAE cut its oil production by 150,000 barrels per day from an average of 3.09mbpd in Q4 2016 to an average of 2.89m in Q4 2017, representing a drop of almost 6.4 per cent.

While OPEC leader Saudi Arabia will pick up the slack, Morgan Stanley believes oil markets will be undersupplied by around 600,000 in the second half of 2018.

An International Energy Agency scenario projects oil production falling by around 1.5 million bpd due to the loss of Iranian and Venezuelan oil.

"Also, taking a broad range of estimates from IEA, EIA and others, Saudi held spare capacity in the range of 1.3 - 2.1 mb/d when oil production was ~10 mb/d".

Chinese stocks fell sharply on Tuesday, with equity markets in Asia near nine-month lows as investors fear the Sino-U.S. trade row could derail a rare period of synchronized global growth.