Oil prices surge as Saudis, Russia won't open spigots

Crude prices are spiking

Brent crude passed $81 a barrel Monday - its highest level in almost four years - due to a tightening oil market and OPEC leaders stating they won't be immediately boosting output.

A committee comprised of the Organization of the Petroleum Exporting Countries (OPEC) cartel and non-OPEC producers said it was satisfied with the current market outlook, which represented "an overall healthy balance between supply and demand".

OPEC also ignored US President Trump's request to lower oil prices by increasing output, keeping oil prices well supported.

The bank said "the Iran factor may dominate the market near-term and cause a (crude price) spike", although it added that emerging market "demand concerns could reappear thereafter".

In the meantime, he argued that OPEC and non-OPEC agreements signed so far are not just about boosting oil prices, but also about maintaining market stability.

The Opec oil cartel raised its global production forecast on Sunday based on higher-than-predicted United States output in a report outlining a long-term rise in net demand, particularly in developing countries.

USA commercial crude oil inventories C-STK-T-EIA are at their lowest since early 2015 and although United States oil production C-OUT-T-EIA is near a record high of 11 million barrels per day (bpd), subdued U.S. drilling activity points toward a slowdown in output. Trump tweeted on September 20. "I don't know of any refiner in the world who is looking for oil and is not able to get it", Falih said, adding that Saudi Arabia could raise output by up to 1.5 million barrels per day (bpd) if needed.

The Organization of the Petroleum Exporting Countries and non-Opec states, including top producer Russian Federation, gathered in Algiers on Sunday for a meeting that ended with no formal recommendation for any additional supply boost to counter falling supply from Iran.

Alexander Novak, energy minister for the former Soviet Union, said his country is ready to hike its oil output after the implementation of USA sanctions on Iran: "I don't think we can discuss the exact number at this point but what I can tell you for sure is that we have significant potential to increase our production".

The official further said the USA could tap into its own strategic reserves to compensate for the missing Iranian oil volumes. US West Texas Intermediate (WTI) crude futures were at $72.27 a barrel, up 19 cents, or 0.3 percent from their last settlement. Rapid growth in US production means that oil stockpiles could expand again next year, but it's too early to say whether the production limits agreed in 2016 would need to remain in place, he said.

Higher prices tend to mean higher petrol costs.

Meanwhile, OPEC sees oil demand retreating in the near-term, to 31.6 million barrels a day in 2023 versus 32.6 million barrels a day in 2017, but it will rise to current levels, again, around the time that the US shale supply peaks.

Bank of America's main scenario is for oil prices next year of around US$80 a barrel, according to the note.

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