The consensus view is for prices to remain near current levels, but the market is “more fragile than it looks,” Ben Luckock, the co-head of oil trading said in an interview at APPEC in Singapore. Brent crude is nearing $90 a barrel after OPEC+ heavyweights reduced supply — curbs that could continue further.
“One reason is underinvestment in new oil production,” he said on Monday. “Combined with higher interest rates, which make it more expensive to hold oil in storage, it means there isn’t much slack or flex in the system. Put all together, and you have a market that’s susceptible to price spikes.” Oil options traders are showing confidence in the recent sustained surge in prices, bolstering wagers that crude will rally toward $100, even as questions remain over China’s outlook. However, Luckock and other attendees at the conference said it wasn’t all bad when it came to nation’s economy.Cuts by OPEC+ have been successful, Vitol Group Chief Executive Officer Russell Hardy said earlier in the day.
“OPEC+ will be guided by price,” said Luckock. “I think they will be tapering by the end of the year.”Wild weather across the world, particularly hotter temperatures, have had a material impact on refineries and the operational reliability of plants, said Luckock. He cited examples in Italy and the US this summer, and how local outages had a ripple effect on the supply and price of products globally.
“The extreme weather conditions we have seen this year really are a big deal,” he said. “The heat has created huge problems for refineries in Europe and America with more outages and problems that are harder to fix.”
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