Oil prices edged higher on Friday after experiencing losses in earlier session amid worries over supply as US sanctions against Iranian loom, but remained pressured after US President Donald Trump called for the Organization of the Petroleum Exporting Countries (OPEC) to reduce crude prices.
International benchmark Brent crude futures for November delivery gained 0.9 percent to $79.42 per barrel, while US West Texas Intermediate rose 0.6 percent to $70.78 per barrel. The price of oil has climbed 7 percent in August and nearly 18 percent this year.
Trump stated in a tweet on Thursday that OPEC needs to lower prices because of the military security the US provides for the countries of the Middle East.
Head of trading for Asia-Pacific Stephen Innes said Trump’s comments just days before the OPEC meeting put a focus on the potential supply impacts of US-led Iran sanctions.
The market had until that point been trading fluidly with the assumption that Saudi Arabia is now comfortable with Brent at $80 or even higher, which is challenging the market’s long-held supposition that prompt Brent between $70 and $80 was OPEC’s sweet spot, Innes added.
Brent has been trading just below $80 per barrel due to concerns over supply shortages from looming US sanctions that targeted Iran’s oil industry.
Although supply worries have lifted prices, OPEC and its allies might not see eye to eye on an official increase in output at Sunday’s meeting, according to a source with knowledge of the matter.
OPEC, Allies to Discuss Output as Iran Sanctions Approach
OPEC and non-OPEC members, including Russia, will meet on Sunday in Algeria to discuss the allocation of supply increases to offset a deficit of Iranian crude exports caused by US sanctions that are due to start in November.
A source stated that Saudi Arabia feared that the rise in oil prices will trigger slams from Trump, and is also worried about a lack of spare oil capacity.
It is complicated because Saudi Arabia, OPEC’s largest producer, needs to balance supply and demand, and it has to balance crude prices so they do not increase too much before the US elections, according to the person.
It is also political as the Saudis do not want to overproduce then the Iranians complain to OPEC that it is taking Iran’s market share. They also do not want prices to drop too much, the source added.
Iran in response, has vowed to veto any decisions by the OPEC and its non-OPEC allies that would harm Tehran’s interest.
Iranian Oil Minister Bijan Namdar Zanganeh stated that any move by the OPEC that poses the slightest threat to Iran will be blocked.
Any decision on a new production agreement by OPEC’s Joint Ministerial Monitoring Committee (JMMC) that meets on Sunday would lack legality since decisions can only be made at OPEC meetings in the presence of all OPEC members and by consensus of members, he said.
Zanganeh did not provide further details about how to block the decision and stated that he will not be attending the Algerian JMMC meeting.
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