Opec, non-Opec countries seek long-term deal
further market volatility as concern about output cuts in Venezuela and Libya continue to escalate supply challenges.
Barkindo said Iran is a “very important producer and exporter” of oil. “When you have major producers facing supply challenges, it’s of concern” for Opec and consumers alike, he said.
Crude is averaging about $72 a barrel this year, and the International Energy Agency (IEA) warned last week that prices could rise above $80 unless producers compensate for lost supply from Opec members Iran and Venezuela. While trade disputes and financial woes in some countries may affect crude demand, the IEA said supply risks are the more important issue. Venezuela is pumping half as much oil as in 2016 and faces further declines amid economic upheaval.
The Opec chief praised the agreement between Opec and nonmembers that cut production and said the organisation would work to make it permanent. “The declaration of cooperation has come to stay,” he said.
Two days ago, Barkindo voiced concern over unspecified threats to global demand for crude. Oil consumption is “robust,” but crude use “is beginning to face some headwinds,” he said in an interview without elaborating.
Oil market analysts said the Algiers could make oil prices volatile. On September 13, oil’s implied volatility was 25.4 per cent, its highest since July 16. Looming US sanctions on Iran could push prices above $70.
Oil market analyst at S&P Global Platts Herman Wang said the supply challenges posed by Iran and Venezuela — not to mention volatile Libya — will put the focus on Saudi Arabia’s willingness and ability to play swing producer.
“Preventing a price slump, maintaining Opec harmony and keeping Trump onside simultaneously looks increasingly unattainable,” Wang said.
Analysts at Investopedia said the oil market has been caught between two narratives. The first and slightly preferred story is that oil prices could rocket to over $100 per barrel after US sanctions against Iran’s oil exports come into effect in November. The other is that an ongoing trade dispute between the US and China could escalate and drag down the global economy.
“Collective increases in Opec crude production will need to carefully balance Iranian and Venezuelan sensitivities with promises pertaining to the group’s official goals of seeking a balanced market and being reliable suppliers,” said Harry Tchilinguirian, BNP Paribas’ global head of commodity markets strategy.