Total CEO says oil price could hit US$100 'in coming months'

Total CEO says oil price could hit US$100 'in coming months'

Kerry Wise
May 18, 2018

The Brent crude oil price has already hit 80 dollars per barrel, its highest since November 2014, following Total's announcement that its 40-million-euro (47-million-dollar) gas project in Iran will be scrapped unless the company is exempt from the US' looming anti-Iranian sanctions.

Shortly before 1000 GMT, Brent North Sea crude for delivery in July jumped to $80.18 a barrel - the highest level since November 2014 - after a gain of more than one percent compared with Wednesday's close. It stood at $79.39 as of 8:20 pm Nigerian time.

Spot crude oil cargo prices are at their steepest discounts to futures prices in years as sellers are struggling to find buyers for West African, Russian and Kazakh cargoes, while pipeline bottlenecks trap supply in west Texas and Canada.

The sanctions against Iran reinstated by US President Donald Trump raise two all-important questions that have no convincing answers.

The potential loss of 1 million barrels of Iranian crude from the world market and the ongoing decline of Venezuela's oil sector could push oil prices beyond $100/b, Patrick Pouyanne, chairman and CEO of French oil major Total, said Thursday.

U.S. President Donald Trump's decision this month to withdraw from an worldwide nuclear deal with Iran and revive sanctions that could limit crude exports from OPEC's third-largest producer has boosted oil prices.

The prospects of a drop in Iranian oil exports due to sanctions imposed by the USA after pulling out from the Iran nuclear deal has moved the prices northwards.

"Supply concerns are top of mind after the United States left the Iran nuclear deal", said Norbert Rücker, of Julius Baer.

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Separately, Al-Falih and United Arab Emirates Energy Minister Suhail Al Mazrouei said recent moves in oil prices have been driven by geopolitics and that global supply remains ample, according to a statement released by the Saudi energy ministry.

While futures prices climb, physical crude markets are sagging under the weight of unsold barrels.

"The import and export situation in reality has still not freed up but maybe we can see something now the long-awaited decision has been revealed", said the source in Asia.

Since the European Union is unlikely to follow the re-imposing sanctions on Iran, the overall impact on the Persian Gulf state's exports will be "far more muted" than in the past, tanker tracker Petro-Logistics said in a note.

"US shale can not solve the current oil supply problems", it said, arguing that USA oil would not be sufficient to offset production losses from Iran, Venezuela and Angola.

The International Energy Agency (IEA) said on Wednesday it had lowered its global oil demand growth forecast for 2018 from 1.5 million barrels per day (bpd) to 1.4 million bpd.

"While recent data confirms strong growth in first quarter 2018 and the start of second quarter 2018, we expect a slowdown in the second half of the year largely attributable to higher oil prices", the IEA stated.

"We rallied as the day went on", said Gene McGillian, manager of market research at Tradition in Stamford.