Crude oil market: $100-oil scenario realistic? Traders turn bullish after OPEC rebuffs Donald Trump

Oil extended gains near the highest level in almost four years as banks and trading houses said prices may spike after OPEC and its allies rebuffed President Donald Trump’s call to boost production.

Futures in London rose 0.5 percent after a 3.1 percent advance Monday. Mercuria Energy Group Ltd. and Trafigura Group expect the return of $100 a barrel last seen in 2014 due to a potential loss in Iranian supply. Bank of America Corp. joined JPMorgan Chase & Co. in predicting higher prices. Adding to positive sentiment are forecasts for a decline in US stockpiles.

Oil rallied after the Organization of Petroleum Exporting Countries and its partners stopped short of pledging immediate production increases even though looming US sanctions on Iran have started removing barrels from the market. Still, a trade standoff between the US and China could put global economic growth and energy demand at risk in the longer term, with BP Plc warning that the risk hasn’t been priced into crude yet.

“OPEC gave a clear answer to Trump, who criticized the group for pushing for higher prices — they obviously refused to submit,” said Satoru Yoshida, a commodity analyst at Rakuten Securities Inc. in Tokyo. “While the escalation of the U.S.-China trade war is a negative factor, it’s overshadowed by OPEC’s bullish comment.”

Brent for November settlement rose as much as 49 cents to $81.69 a barrel on the ICE Futures Europe exchange and traded at $81.62 at 3:45 p.m. in Tokyo. The contract climbed $2.40 to $81.20 on Monday. The global benchmark traded at a $9.28 premium to West Texas Intermediate for the same month.

WTI for November delivery traded at $72.34 a barrel on the New York Mercantile Exchange, up 26 cents. The contract climbed $1.30 to $72.08 on Monday. Total volume traded was about 36 percent below the 100-day average.

Chinese crude futures for December delivery added 3.6 percent to 551.1 yuan on Tuesday from Friday’s close. Trading on the Shanghai International Energy Exchange was closed on Monday for a public holiday.

$100 Oil

With the US sanctions on Iran taking full effect in early November, the $100-oil scenario could be becoming more realistic. Brent crude may spike to above that level in the fourth quarter as the market doesn’t have enough excess capacity to replace Iranian barrels, Mercuria co-founder Daniel Jaeggi said. That bullish prediction was echoed by Trafigura co-head of oil trading Ben Luckock, who said Iran’s supply will be lower than most people had expected.

Meanwhile, US crude inventories are forecast to have fallen for a sixth week, according to a Bloomberg survey of analysts before Energy Information Administration data due Wednesday. Stockpiles at the Cushing storage hub in Oklahoma may have decreased 150,000 barrels in the week ended September 21, according to a forecast compiled by Bloomberg.