Oil prices rise over Middle East tensions

Oil prices jumped upwards on weekend as Trump confirmed his plan to decertify the Iranian nuclear deal while both Iraqi and Kurdish soldiers mobilized near the Kirkuk oil region. These higher oil prices were further supported by bullish noises from both OPEC and the U.S. shale community.

Also a bullish data from China showing an uptick in oil imports by 1 million barrels per day in September, from a month earlier contributed to this.

West Texas Intermediate (WTI) and Brent, the equivalent of Nigeria’s own Bonny Light gained more than 2 percent at the weekend..

President Trump confirmed his plan to decertify the Iran nuclear deal on Friday, a move that could ratchet up tensions between the two nations. However, he will stop short of calling for new sanctions. Instead, he will ask the U.S. Congress to hold off until the administration tries a new strategy to tighten the screws on Tehran.

Iran promised a “crushing” response if the U.S. declared the Revolutionary Guard a terrorist organization. As of now, the ramifications for the oil market are unclear, but probably not that significant in the near-term.

The key European nations party to the agreement are still supporting the original deal.

Meanwhile Kurdish authorities have sent thousands of troops to the key oil region of Kirkuk to defend the region, after the Iraqi government mobilized troops and tanks south of the city. The military movements raised concerns of a possible clash between the central government in Baghdad and Kurdish forces, a development that some fear could lead to civil war.

OPEC at the weekend also increased its demand forecast for its oil in 2018, and also said that the oil market could flip into deficit next year.

The group said that the world would need 33.06 million barrels per day (mb/d) from OPEC, an upward revision of 230,000 bpd from its last forecast. That is the third consecutive month that OPEC has increased its demand projection for 2018 and it underscores the growing confidence in the impact of the collective cuts.Separately, a top OPEC official estimated that the crude inventory surplus would be eliminated next year.

However while, the IEA warned that while progress is being made, the inventory gains will stall next year as non-OPEC supply picks up pace. The Paris-based energy agency said that OPEC will probably need to take more dramatic action to accelerate the tightening underway.

OPEC’s Secretary-General made headlines last week on multiple fronts, stating that the group needs to take “extraordinary measures” and also calling on U.S. shale to restrain output.

Another comment he made included the notion that more nations need to join in on OPEC’s production cuts in order to accelerate the rebalancing effort. It remains unlikely that any substantial cuts will come from additional countries, but the market is growing confident that the OPEC/non-OPEC coalition will at least stick with the current agreement and possibly extend it.

A Deloitte survey of 250 oil executives found that the industry does not see oil rising above $60 per barrel next year and most see oil remaining below $70 per barrel through the end of the decade. That is marked shift from last year’s survey, which had some executives seeing a steady increase in prices. “The bottom line is that companies should focus on cost discipline and operational efficiency,” said Andrew Slaughter, head of Deloitte’s Center for Energy Solutions. “The new reality seems to have set in; waiting for a significant price recovery may be a long haul.”