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(Bloomberg) — Leading commodities trader Trafigura Group says higher interest rates and lower investment could push oil prices higher as markets slide.
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In an interview at APPEC in Singapore, Ben Luckock, co-head of oil trading, said the consensus is for prices to remain close to current levels, but that the market is “much more fragile than it looks”. Brent crude is near $90 a barrel after the OPEC+ giants cut supply – curbs that could continue.
“One reason is less investment in new oil production,” he said on Monday. “Combined with higher interest rates, which make it more expensive to keep oil in storage, it means there is not much slack or flexibility in the system. Put all that together, and you have a market that is sensitive to price increases.
Oil options traders are showing confidence in the recent sustained rally in prices, speculating that crude will reach $100, even as questions remain over China’s outlook. However, Luckock and others present at the conference said that all was not bad when it came to the country’s economy.
Read more: Asia Oil Latest: Black gold suggests Chinese oil demand will boom
Russell Hardy, chief executive of Vitol Group, said earlier in the day that the cuts by OPEC+ had been successful. Deputy Prime Minister Alexander Novak said last week that Russia had agreed further sanctions with its allies in the grouping. Traders and analysts also expect Saudi Arabia to extend its cuts until October.
“OPEC+ will be guided by price,” Luckock said. “I think they will come down by the end of the year.”
meteorological risk
Wild weather around the world, particularly hot temperatures, has had a significant impact on the operational reliability of refineries and plants, Luckock said. He cited the examples of Italy and the US this summer and how local outages had an impact on the supply and price of products globally.
the story continues
“With the extreme weather conditions we’ve seen this year, it’s a really big deal,” he said. “The heat has caused major problems for refineries in Europe and the US with more cuts and problems harder to fix.”
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Source: finance.yahoo.com
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