Oil: OPEC warns swelling inventories could cause oversupply

Saudi
Arabia’s energy minister al-Falih addresses a news conference
after an OPEC meeting in Vienna
Thomson Reuters

Less than two weeks before US
sanctions against Iran kick in, OPEC said the oil market could
shift toward a surplus and signaled it would adjust output
accordingly if that were the case.

Saudi OPEC governor Adeeb
Al-Aama

told Reuters

on Thursday the market in the
fourth quarter could be approaching “an oversupply situation.”
Riyadh is the largest oil exporter in the world and has told the
Trump administration it could step up production after sanctions
against Iran take effect November 4.

“We think that demand will start
dropping off as we approach year-end in accordance with regular
seasonal patterns,” he said at a meeting in Vienna, according to
Reuters. “We have the flexibility to adjust our production to
mirror it.”

While OPEC said in a statement
out Thursday that it was satisfied with developments in the oil
market, it also cited a potential buildup of supply. Countries
bound by supply constraints reached a conformity level of 111% in
September 2018, according to the cartel. Meanwhile, US crude
stockpiles have risen for five weeks in a row.

“The committee however expressed
concerns about rising inventories in recent weeks and also noted
looming macro economic uncertainties which may require changing
course,” the


statement

said.

But against a backdrop of falling
output in key OPEC countries, including Venezuela and Angola,
forecasters warn sanctions could squeeze the market. The
International Energy Agency said in a recent report that cutting
Iran out of the market could make
maintaining global supply “very challenging.”

Treasury Secretary Steve Mnuchin
said Sunday that it would be
more difficult than before for countries to get sanctions
waivers. To get waivers, he said buyers would be required to
cut oil imports from Iran by more than the 20% demanded during
the Obama administration.

Oil prices

rose more
than 1% from recent lows after Saudi authorities, in a reversal,
said Washington Post journalist Jamal Khashoggi
was killed in a planned operation in its Istanbul
consulate. 
Brent is
currently trading around $76 per barrel and West Texas
Intermediate at around $67 a barrel.

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