Oil jumps as market tightens, more gains seen

Trump's Blow to Iranian Oil Sparks Curious Price Divergence

The price rally mainly stemmed from a decline in oil exports from OPEC member Iran due to fresh USA sanctions.

On Sunday, Iranian oil minister Bijan Zanganeh said Trump's tweet "was the biggest insult to Washington's allies in the Middle East". Trump wrote on Sunday.

Higher gasoline prices for United States consumers could create a political headache for Republican Trump before mid-term congressional elections in November.

Iran's OPEC governor Hossein Kazempour Ardebili talks to the media at the OPEC Ministerial Monitoring Committee in Algiers, Algeria September 23, 2018.

"OPEC is struggling to battle through a flawless storm of strong demand and bigger-than-expected supply losses", said Daniel Hynes and Soni Kumari, Commodity Strategists at ANZ Bank last week.

Major oil trading houses are predicting the return of $100 crude for the first time since 2014 as the market braces for the loss of Iranian supplies because of USA sanctions. "So far, we have made a decision to stick to our June agreements", Novak said.

The OPEC cartel in December 2016 concluded an agreement with non-member states - including Russian Federation - to reduce output in order to arrest sliding prices.

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That equates to an increase of about 1 million bpd, but the latest data shows they are some way from achieving that target.

OPEC's reticence, combined with signs of accelerating supply losses from Iran, created a bullish mood the the annual gathering of the Asian oil industry, traders, refiners and bankers in Singapore on Monday.

Word has gotten out that the JMMC, operating beyond its mandate, is to provide a figure for increasing oil supply under the pretext of the so-called "offsetting shortages caused by Iran's Production Reduction'".

Recently, crude oil prices have benefited from unnamed Saudi Arabia sources implying that the producer would not increase production, being comfortable with prices above $80/barrel.

Falih said returning to 100 percent compliance was the main objective and should be achieved in the next two to three months.

Saudi Arabia said the deal allowed countries able to produce more, such as itself, to go ahead and do so, to make up for shortfalls. "The reason Saudi Arabia didn't increase more is because all of our customers are receiving all of the barrels they want".

The next meeting of the conference - the full group of OPEC and non-OPEC ministers, is not until December.

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