JAKARTA (TheInsiderStories) – International oil prices surge into the highest level since 2014 on Tuesday (24/04), driven by the expectations of U.S sanctions against Iran and as Organization of Petroleum Exporting Countries (OPEC) continues to hold supplies amid strong demand.
Last week, demand for oil hit a record level at 9.86 million barrels a day and make the OPEC/Non-OPEC Joint Ministerial Monitoring Committee (JMMC) convened in Jeddah, the Kingdom of Saudi Arabia and take a stand to cut of 149 percent of their production adjustments, the highest level so far.
In the first meeting on Nov. 30, 2016, JMMC adjusted production around 1.8 million barrels per day which came into effect on Jan. 1, 2017 for six months. The second joint OPEC-Non-OPEC Producing Countries’ Ministerial Meeting, held on May 25, 2017, decided to extend the voluntary production adjustments for another nine months commencing July 1, 2017.
At the third joint OPEC-Non-OPEC Producing Countries’ Meeting, held on Nov. 30, 2017, it was agreed to amend the Declaration of Cooperation so that it will take effect for the entirety of 2018. Their collective efforts continue to yield positive results, with market fundamentals being solid.
OECD commercial stock levels have been adjusted from a peak of 3.12 billion barrels in July 2016 to 2.83 billion barrels in March 2018. The next JMMC Meeting is scheduled to be held on June 21, 2018 at the OPEC Secretariat in Vienna, Austria.
The JMMC move has pushed the brent crude to as high as US$75.20 a barrel in early trading on Tuesday (24/04), a level not seen since November 2014 before stood at $74.89 a barrel at 01:09 GMT, up 18 cents, or 0.2 percent from the last close, according to Reuters commodities index. Meanwhile, the U.S benchmark West Texas Intermediate futures, rose 20 cents, or 0.3 percent, to $68.84 a barrel.
The price of crude is currently at its highest level in three years, reflecting ongoing concerns over geopolitical tensions in the Middle East, which is the source of nearly half of the world’s oil supplies.
President Donald Trump’s administration will decide whether to defend Iran’s nuclear deal or otherwise renew its sanctions on OPEC members on 21 May, which are increasingly tightening global supplies.
OPEC’s efforts to tighten markets are led by Saudi Arabia’s top exporter, where the country’s state oil firm, Saudi Aramco, is pushing prices higher ahead of an IPO planned later this year or 2019.
The strengthening of oil comes from Saudi Arabia’s recent commitment to push back the price between $70 to $80 per barrel as well as the level of supplies that are back in the normal range,.
OPEC supply management and new sanctions threats come as demand in Asia, the world’s largest oil-consuming region, reached a record due to the operation of new refineries or refineries whose capacity was warned, from China to Vietnam.
Fuel prices are controversial in Indonesia, where the government faces challenges with stark income inequality. The raising prices has triggered controversies in the past.
A higher oil price will amplify the effects of higher interest rates on the financial markets. Higher prices tend to reduce consumer demand and consumption while higher interest rates discourage borrowing and higher-risk investing in equities.
In January, the government began a two-year policy of not raising subsidized prices for electricity tariffs and fuel such as kerosene, transportation diesel and premium gasoline-a move that ensures prices remain at current levels or lower through next year’s elections. Last month, the government announced a cap on coal prices.