Crude oil prices are seen higher in Asia on Monday on capacity worries.
ICE Brent crude was quoted 0.36 percent higher to US$83.30 a barrel, while NYMEX West Texas Intermediate gained 0.33 percent to US$73.49 a barrel. Last week, Brent rose by US$1 to settle at US$82.72 a barrel on Friday, while WTI jumped US$1.13 to settle at US$73.25 a barrel.
Over the weekend, U.S. President Donald Trump and Saudi Arabia’s King Salman discussed efforts to maintain oil supplies to ensure the stability of the oil market and ensure the growth of the global economy during a call, according to Saudi official news agency SPA.
But even if Trump can convince Saudi Arabia to supply more oil, the question becomes, “how much spare capacity does the Kingdom have,” Stephen Innes, APAC head of trading at OANDA, asked in a note on Monday. He noted that come November 4, the U.S. sanctions on Iran go into effect, essentially taking 1.5 million barrels of Iranian oil offline.
“If the market senses that Saudi Arabia capacity is tapped out at 10.5 million barrels per day … oil prices will rocket higher,” he says, making the US$100 per barrel price tag a real possibility.
Saudi Arabia, the world’s largest oil exporter, has usually kept more than 1.5 – 2 million barrels per day of spare capacity on hand, according to the U.S. Energy Information System. However, the result of U.S. sanctions could put Saudi Arabia to the test.
U.S. rigs drilling for oil fell by three to 863 last week, Baker Hughes said on Friday. Also, bullish bets on crude oil futures in London and New York rose by 3,728 contracts to 346,566 in the week to Sept. 25, the U.S. Commodity Futures Trading Commission CFTC said on Friday.