Crude oil futures held on to gains in morning European trading Friday, edging higher as the market continued to weigh warnings of supply-side risks from the International Energy Agency. At 1055 GMT, the November ICE Brent crude futures contract was up 13 cents from Thursday’s settle at $78.32/b, while the NYMEX October light sweet crude contract was up 26 cents at $68.85/b.
In its latest monthly oil report, the IEA warned that the oil market is entering a “very crucial period,” highlighting continued output decline in Venezuela, this week’s attack on the headquarters of Libya’s NOC and a sharp reduction in Iranian output ahead of the reinstatement of US sanctions on November 4.
Despite the supply-side risks posed by Venezuela and Iran, however, spare capacity in Saudi Arabia and Iraq, coupled with potential output recovery in Libya and Nigeria, could help balance the market. The IEA noted in its report that Iraqi production jumped by 90,000 b/d in August and with its exports running at nearly 4 million b/d, it had shipped more crude than Iran produced.
At the same time, the report noted that OPEC crude output rose to a nine-month high of 32.63 million b/d in August, helping to offset the declines observed in Venezuela and Iran. According to analysts at Commerzbank, while the IEA report was bullish when warning of supply shortages, OPEC supply could still fall without putting the market into deficit. “Measured against the estimated demand for 2019, OPEC is even producing 700,000 b/d too much. So that is the size of the cushion to absorb any outages,” Commerzbank analysts said in a note.
Market participants will be taking further price action cues from the latest Baker Hughes rig count data — an early indicator of future US crude production — that is due for release later Friday.Platts
