Published: Mon, September 24, 2018
Markets | By Erika Turner

Saudi Arabia rejects Trump request to hike oil output

Saudi Arabia rejects Trump request to hike oil output

USA light crude was $1.25 higher at $72.03 on Monday.

The price of oil has risen to new four-year highs close to $81 a barrel after Saudi Arabia and Russian Federation rejected calls by Donald Trump to increase production.

Looking ahead, crude oil prices await the release of US Energy Information Administration and Department of Energy inventory figures later this week.

Commodity traders Trafigura and Mercuria said on Monday that Brent could rise to $90 per barrel by Christmas and pass $100 in early 2019, as markets tighten once per cent sanctions against Iran are fully implemented from November.

OPEC and its allies are scheduled to meet on Sunday in Algeria to discuss how to allocate supply increases to offset a shortage of Iran supplies due to US sanctions.

The price rises have stemmed mainly from a decline in oil exports from OPEC member Iran due to sanctions introduced by Mr Trump.

On Monday morning, Brent crude, the main European futures contract, rose above $80 United States a barrel to $80.43 U.S. at mid-morning.

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Benchmark Brent crude hit its highest since November 2014 at $80.94 per barrel, up $2.14 or 2.7 percent, before easing back to around $80.65 by 1000 GMT.

"The market is well-supplied", Saudi Energy Minister Khalid Al-Falih said after a meeting of OPEC and its allies over the weekend.

Opec and other producers had discussed raising output by 500,000 barrels a day, Reuters reported.

"The market does not have the supply response for a potential disappearance of 2 million barrels a day in the fourth quarter", Jaeggi said in a speech at the S&P Global Platts Asia Pacific Petroleum Conference (APPEC) in Singapore.

The biggest source of new global supply, US shale, is also experiencing growing pains as pipeline bottlenecks and workforce issues hamper growth. Trump said last week that OPEC "must get prices down now!" but Iranian Oil Minister Bijan Zanganeh said on Monday OPEC had not responded positively to Trump's demands. "We in Saudi Arabia have not seen demand for any additional barrel that we did not produce".

Iran, OPEC's third-largest producer, has accused Mr Trump of orchestrating the oil price rally by imposing sanctions on Tehran and accused its regional arch-rival Saudi Arabia of bowing to U.S. pressure.

In contrast, OPEC said demand for oil in OECD countries would fall from the early 2020s, but would still be the number one source of energy through to 2040. That suggests OPEC's power to influence the market will be tempered by US production for about another decade.

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