Benchmark Brent could rally up to $100 per barrel as it topped $80 to reach a four-year high on Monday amid concerns over lost Iranian barrels and limited spare capacity once Opec and its allies bring in more supply.
Trading houses Trafigura and Mercuria said that oil prices could inch towards $100 per barrel by the end of the year or early 2019, citing a loss of almost two million barrels per day of export from Iran as the biggest factor behind the rally.
“The market simply does not have an adequate supply response for a 2m bpd disappearance of oil from the markets,” Daniel Jaeggi, president of commodity merchant Mercuria Energy Trading told an energy conference in Singapore, news agencies reported.
Brent futures breached the $80 per barrel mark on Monday, after having averaged $72 per barrel for much of the year and rallying around $79 per barrel since August. The rise comes amid pledges by the Arabian Gulf Opec oil producers of sufficient oil production capacities to meet demand, even as the group remained vague about allotment of quotas during its latest technical committee meet on Sunday.
UBS, which revised its 12-month forecast for Brent to $85 per barrel in June, said it “would not rule out a spike in oil prices to the $100 per barrel mark” over the coming year, if further supply disruptions materialised.
“Oil can hit $100 per barrel if some disruptions also occur in other fragile Opec states such as Libya, Nigeria, or Iraq, and/or Venezuelan production continues to fall,” said Giovanni Staunovo, a commodity analyst at the Swiss lender.
While much will hinge on the volume of disruption and the period over which the loss would be sustained, Mr Staunovo also cited the decline in spare capacity to "lows not seen since 2008" as well as curtailment of US output due to pipeline constraints as other factors behind the oil rally.
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Read more:
Opec expects shale from US to account for 15% of global supply by late 2020s
Opec and allies say significant capacity exists but not needed
Trade wars and falling Iran exports to impact supply and demand, says Opec
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“In the second quarter of 2019 we could have again a stronger increase in US supply, once the pipeline constraints get fixed,” he added.
Japan’s MUFG, which maintains a base case oil price projection of $72 per barrel for 2018, views any rally of Brent up to $100 per barrel as “short-lived”.
“It will merely lead to demand destruction becoming more likely, through a combination of enhanced efficiency and a slowdown in the global economy,” said Ehsan Khoman, MUFG’s head of MENA research and strategy.
“Moreover, higher oil prices could prompt the United States to consider extraordinary measures such as the usage of [its] strategic petroleum reserves to taper [domestic] gasoline prices ahead of the its mid-term elections in early November,” he said.
Rapid growth of shale backed by greater efficiency learnings is very likely in the event of a higher oil price environment, cautioned Mr Khoman.
"Succinctly put, shale remains the firm global swing oil producer. The shale response over the medium-term is likely to be robust,” he added.
Opec in its latest World Oil Outlook observed that peak tight oil supply, mainly from the US, will account for 15 per cent of all global output by the late 2020s.
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Developer: Treyarch, Raven Software
Publisher: Activision
Console: PlayStation 4 & 5, Windows, Xbox One & Series X/S
Rating: 3.5/5
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Director: Laila Abbas
Starring: Yasmine Al Massri, Clara Khoury, Kamel El Basha, Ashraf Barhoum
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Starring: Joaquin Phoenix, Lady Gaga, Brendan Gleeson
Director: Todd Phillips
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Founders: Khawla Hammad and Inas Abu Shashieh
Based: Abu Dhabi
Sector: HealthTech and wellness
Number of staff: 4
Funding to date: Bootstrapped
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How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
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Moon Music
Artist: Coldplay
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Number of tracks: 10
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The Melbourne Mercer Global Pension Index
The Melbourne Mercer Global Pension Index
Mazen Abukhater, principal and actuary at global consultancy Mercer, Middle East, says the company’s Melbourne Mercer Global Pension Index - which benchmarks 34 pension schemes across the globe to assess their adequacy, sustainability and integrity - included Saudi Arabia for the first time this year to offer a glimpse into the region.
The index highlighted fundamental issues for all 34 countries, such as a rapid ageing population and a low growth / low interest environment putting pressure on expected returns. It also highlighted the increasing popularity around the world of defined contribution schemes.
“Average life expectancy has been increasing by about three years every 10 years. Someone born in 1947 is expected to live until 85 whereas someone born in 2007 is expected to live to 103,” Mr Abukhater told the Mena Pensions Conference.
“Are our systems equipped to handle these kind of life expectancies in the future? If so many people retire at 60, they are going to be in retirement for 43 years – so we need to adapt our retirement age to our changing life expectancy.”
Saudi Arabia came in the middle of Mercer’s ranking with a score of 58.9. The report said the country's index could be raised by improving the minimum level of support for the poorest aged individuals and increasing the labour force participation rate at older ages as life expectancies rise.
Mr Abukhater said the challenges of an ageing population, increased life expectancy and some individuals relying solely on their government for financial support in their retirement years will put the system under strain.
“To relieve that pressure, governments need to consider whether it is time to switch to a defined contribution scheme so that individuals can supplement their own future with the help of government support,” he said.
COMPANY PROFILE
● Company: Bidzi
● Started: 2024
● Founders: Akshay Dosaj and Asif Rashid
● Based: Dubai, UAE
● Industry: M&A
● Funding size: Bootstrapped
● No of employees: Nine
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