Published: Tue, May 15, 2018
Finance | By Claude Patterson

OPEC member complains USA president is driving up prices

OPEC member complains USA president is driving up prices

"Germany has said it will protect its companies from USA sanctions, Iran has said French oil giant Total TOTF.PA has yet to pull out of its fields and all the while it seems the Chinese are ready to fill the void created by the U.S", said Greg McKenna, chief market strategist at AxiTrader.

USA sanctions on Iran will include a six-month deadline for buyers to wind up operations in Iran, meaning any loss of supply will not immediately affect the market. That would hurt not just Iran's economy but also the dollar's liquidity, as the global oil trade undergirds the greenback, said Edward Al Hussainy, senior analyst, global rates and currency at Columbia Threadneedle in Minneapolis. Oil reached $78.28 a barrel on Monday, the highest since November 2014, after the OPEC report was published.

However, there were signs that other members of the Organization of the Petroleum Exporting Countries (OPEC) will raise output to counter the Iran disruption. If OPEC and Russian Federation kept in place their existing oil production cuts for 2018 and beyond, the price could even rise to $US100 before the end of next year, they said.

BoA analysts forecast a strong average price for the year ahead.

Top exporter Saudi Arabia told OPEC it cut output by 39,000 bpd to 9.868 million bpd, which is the lowest since the supply cut deal began, based on figures Riyadh reports to the group. The extra demand is helping to wipe out an oil glut that has plagued markets.

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Side by side, the United States government also reimposed sanctions on the country.

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German Foreign Minister Heiko Maas gives a statement on May 9, 2018 in Berlin after U.S. President Donald Trump pulled the United States out of a landmark deal curbing Iran's nuclear program and reimposed crippling sanctions, defying European pleas and prompting global outcry. Saudi Arabia said last week it was ready to offset any shortage but would not act alone.

"China is the largest commodity producer in the world and the largest commodity consumer in the world, so it would make sense that Chinese futures that are close to the areas of supply and demand would be a more natural benchmark than the US markets", said Marwan Younes, founder and chief investment officer of Massar Capital Management in NY.

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