SINGAPORE: Oil prices dipped on Tuesday on expectations rising output from the United States and producer club OPEC would offset most of the shortfall expected from U.S. sanctions on Iran, but analysts said markets remained tight.
Brent crude futures were at $71.86 per barrel at 0103 GMT, down 18 cents, or 0.3 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures were at $63.42 per barrel, down 8 cents from their previous settlement.
Oil prices surged by around 40 percent between January and April, lifted by supply cuts led by the Middle East-dominated producer club of the Organization of the Petroleum Exporting Countries (OPEC) as well as by U.S. sanctions on producers Iran and Venezuela.
But prices came under downward pressure late last week after U.S. President Donald Trump openly pressured OPEC and its de-facto leader Saudi Arabia to raise output to meet the supply shortfall caused by the tightening Iran sanctions.
Stephen Innes, head of trading at SPI Asset Management, said the producer group "will want to avoid at all cost oil prices surging to levels that will trigger demand devastation, (while) it is clearly in OPEC's best interest to maintain a solid floor on prices".
Bank of America Merrill Lynch said "Iranian oil production will fall to 1.9 million barrels per day in 2H19 from 3.6 million barrels per day in 3Q18 as U.S. sanctions kick in and waivers eventually expire".
Despite this, the bank said it expected "a nearly balanced market in 2019" as output from OPEC and also the United States will rise.
French bank BNP Paribas said it expected oil prices "to rise in the near-term" as crude producers were "over-tightening the market in the face of unplanned supply outages and resilient oil demand".
The bank said it expected crude markets to climb until the third quarter of 2019, adding that prices would then "start to become vulnerable to a sharp rise in U.S. exports of light crude thanks to pipeline and terminal capacity expansion".
U.S. exports exceeded 3 million barrels per day (bpd) for the first time in early 2019 amid a more than 2 million bpd production surge over the past year, to a record of more than 12 million bpd.
BNP Paribas said it saw WTI averaging $63 per barrel in 2019, up $2 from its previous forecast, while Brent will average $71 per barrel, up $3 from an earlier estimate.
"In 2020, we see WTI averaging $64 per barrel and Brent $68 per barrel," the bank said. - Reuters
Oil price climbs, shaking off Trump calls for Opec to offset Iran sanctions
NEW YORK: Oil prices edged higher on Monday, as the market attempted to resume a weeks-long rally that was halted on Friday when U.S. President Donald Trump demanded that producer club OPEC raise output to soften the impact of U.S. sanctions against Iran.
Brent crude futures fell 11 cents, or 0.2 percent, to settle at $72.04 a barrel while U.S. West Texas Intermediate (WTI) crude futures climbed 20 cents, or 0.3 percent, to end the session at $63.50.
Both benchmarks fell by about 3 percent on Friday after Trump told reporters that he had called OPEC and told the cartel to lower oil prices, without identifying who he spoke to, or if he was speaking about previous discussions with OPEC officials.
Analysts and market participants downplayed the comments as details were unclear.
"No representative of OPEC or the Saudi government has come forward to acknowledge any discussion in this regard," said Jim Ritterbusch, president of Ritterbusch and Associates.
"This obvious effort to push gasoline prices down has been attempted previously by Trump and while forcing an initial price decline, such pullbacks have been followed by fresh price highs, sometimes within a matter of days."
Trump's remarks initially triggered a sell-off, putting a temporary ceiling on a 40 percent price rally since the start of the year. The slide was exacerbated by technical factors including an excessive speculative long position in U.S. crude, analysts said.
Speculators raised their combined futures and options net long positions in New York and London by 24,078 contracts to 326,818 during the week to April 23, the highest level since early October. That was the ninth consecutive increase.
The rally in oil prices had gained momentum in April after Trump tightened sanctions against Iran by ending all exemptions previously granted to that major buyers.
U.S. sanctions against Iran's oil industry will damage the stability of global oil markets, a senior Iranian official was quoted as saying on Monday.
"These sanctions are an example of America's bullying reaction to the change of the balance of power in the world," Amir Hossein Zamaninia, a deputy oil minister for Iran, said in a report carried by the oil ministry's news website SHANA.
U.S. sanctions on Venezuela are also working to tighten global supply as fighting in Libya threatens to curb output there as well.
Oil output in OPEC member Libya has been repeatedly disrupted by factional conflict and blockades since the 2011 uprising that toppled dictator Muammar Gaddafi.
"We are dealing with a market that's not actually short of supply but is short due to politically-motivated action, and we know how quickly that can be turned around if necessary," Saxo Bank analyst Ole Hansen told Reuters.
"Being a bear in the market is a very lonely place now."
Traders said the market was shifting focus to the voluntary supply cuts led by OPEC, the de facto head of which is the world's top oil exporter, Saudi Arabia.
"We are of the view that Saudi Arabia will increase output as soon as May, something they were likely to do anyway in the lead up to summer," ING bank said.
It added that Saudi could increase its output and "still be in compliance with the OPEC+ deal for the month of May."
"We believe that the (fall in prices) is probably due to the situation on the futures market being currently overbought," Commerzbank wrote in a note.
"Consequently, even small levels of uncertainty can spark a more marked price response. However, because the supply situation remains tight a renewed price rise is probable." - Reuters