Crude could reach USD 100 by the end of the year
Ecuadornews:
Oil traders are prepared for the possibility that the price of a barrel of oil reaches USD 100 before the end of the year. The reason for this scenario are the obstacles to Iranian exports, which would lower the global supply of crude oil. In fact, the fear of US sanctions on Iran, which will rule within a month, on Monday (October 1) triggered the price of WTI, a reference for the sale of Ecuador’s oil, to levels not seen since four years.Yesterday it closed at USD 75.23.
US President Donald Trump has demanded Middle East producers to take immediate measures to stop a price escalation that threatens to hurt oil-importing economies, but his request has not materialized in concrete actions.
In May, Trump withdrew its support for the international agreement reached in 2015 to prevent Iran from developing nuclear weapons and announced that instead it will once again impose a sanctions program that will punish, as of November 4, countries and companies that buy Iranian oil.
As that deadline approaches, Tehran’s customers have started looking for alternative suppliers. At the same time, the level of global supply has remained unchanged, which has led to a scarcity scenario that has impacted prices.
“We are moving into a world where there are lower inventories, lower reserve capacity and less protection for buyers,” John Driscoll, chief strategist at JTD Energy Services, told Cnbc. “So USD 100 per barrel is more likely,” he added.
Some energy market analysts expect about 500,000 barrels per day (bpd) to disappear once US sanctions against Iran come into effect. Others have warned that they could stop pumping up to 2 million bpd in the coming months. The sanctions on Iran have sharpened the underlying upward trend, which already existed in the market and which has caused an increase in the WTI price since the beginning of the year.
An increase in the price of oil has a positive impact on Ecuador’s public finances, whose revenues depend on oil exports. Until November 1, the Government must present Pro forma 2019, which will include the projection of the price for the following year.
The Minister of Finance, Richard Martinez, said yesterday (October 2, 2018) that he began working on the document, although he preferred not to advance figures. Despite this, next year may have a considerably better price than this year.
The Pro form 2018 was prepared with a value per barrel of USD 41.92, but crude oil has been sold at a better price. Between January and July, the country placed its crude at an average of USD 57.64, according to data from the Central Bank.
Petroecuador, for its part, projected a theoretical price of USD 68.58 per barrel for September 28. Analysts do not see a change in this uptrend in the short term. Saudi Arabia, strategic partner of the USA and leader of the OPEC, has refused to raise the pumping, and experts doubt that he is able to do so in the short term.
“The OPEC countries do not have the will or ability to compensate for the potential loss of oil in the market caused by the sanctions against Iran,” David Madden, an analyst at CMC Markets, told Efe.
He explained that Saudi Arabia and other producers pump already to the maximum of their capacity.
A price escalation benefits the coffers of the producing countries in the short term, which may weigh on maintaining the scarcity scenario in the market, although in the long term it may have the opposite effect by damaging the advance in demand, Madden warned. (I)
Source: https://www.elcomercio.com/actualidad/crudo-precio-petroleo-ecuador-economia.html