Oil macro analysis, page-776

Bank of America notes “risk of $100 a barrel” in 2019

Oil prices on Friday pulled back from 3 ½-year highs, but marked a second weekly climb in a row, driven by uncertainty over how much oil the global market will lose following the U.S. decision to reimpose sanctions on OPEC member Iran.

Meanwhile, analysts at Commerzbank said Friday current crude-price levels indicated the Organization of the Petroleum Exporting Countries was now “regaining the price power it had lost” in the wake of the first U.S. shale boom that led to the price drop over three years ago.

“A large part of the price slide, which saw Brent plunge from over $100 to below $30 a barrel as a result of the price war between OPEC and the U.S. shale oil industry that began in autumn 2014, has now been reversed,” the analysts wrote in a note.

OPEC’s efforts to rein in a supply glut through production curbs helped boost prices by more than 50% last year. The cartel—led by Saudi Arabia—and 10 outside producers, including Russia, have been holding back crude output by around 1.8 million barrels a day since the start of 2017. The agreement is set to expire at the end of this year.

However, Saudi Arabia—the de facto head of OPEC—signaled this week that it could up its own production to make up for lost barrels from Iran.

“OPEC members and Russia may put more oil on the market to counter the loss” of Iranian oil, said James Williams, energy economist at WTRG Economics. There is also the increased “probability that OPEC will raise quotas at the June meeting.”

Oil market participants Friday also saw further signs of ongoing growth in U.S. crude production. Baker Hughes reported that the number of active U.S. rigs drilling for oil rose for a sixth week in a row, by 10 to 844 this week.

With oil prices at these levels, it “makes more sense for the U.S. to ramp up production,” said Scott Gecas, senior strategic account executive at Long Leaf Trading Group.

June natural gas NGM18, +0.18% fell nearly 0.3% to $2.806 per million British thermal units, still settling about 3.5% higher for the week.

www.marketwatch.com/story/us-oil-prices-hover-at-3-12-year-highs-as-analysts-entertain-the-idea-of-100-crude-2018-05-11