The Organisation of Petroleum Exporting Countries (OPEC) and its allies are set to meet on Sunday in Abu Dhabi ahead of the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC), according to Bloomberg.
With rising inventories and the US poised to produce more than 12mn barrels per day by mid 2019, according to the US Energy Information Administration, higher than previously forecast.
After months of speculation about sanctions against Iran, pressure from the US government to increase OPEC production, and fear of a potential supply crunch, the oil market could face a surge of supply in the near future. Rising fear surrounding potential production cuts from Iran and Venezuela's economic crisis led to a surge in oil prices to a four-year high of $86 per barrel of Brent crude. Brent crude currently sits at $72.20 per barrel (as of writing).
With eight temporary waivers on Iranian oil exports and the promise of increased production out of the Permian basin following bottlenecks and other issues blocking production, global supply is set to increase.
Some industry experts, including Saxo Bank's head of commodity strategy Ole Hansen, have also pointed to external market factors, like the strong dollar, rising debt and the rising cost of financing that debt, that could weaken demand growth. Tensions between the US and China could also impact demand.
LISTEN: Saxo Bank Head of Commodity Strategy Ole Hansen comments on oil price fluctuations:
“They will absolutely want to at some point next year try to arrange a reduction in production,” Ed Morse, head of commodities at Citigroup, told Bloomberg. “Everything points to a fairly weak balance: the world economy is decelerating, the China trade tensions are having a visible impact on demand.”
Still, the full impact of sanctions against Iran has yet to be seen, and if output is cut significantly, OPEC might not need to cut its production. Directly following the issuing of waivers, Iran's oil exports might go up, as countries including South Korea and Japan (which received waivers) fully cut off imports from the country in the run-up to the reimposition of sanctions. The US government plans to totally cut off Iran's energy revenue; even those with waivers will have payments in escrow, in order to apply financial pressure on Iran.