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Crude oil prices could be vulnerable to the upside as the market is still tight, Ben Luckock, Co-Head of Oil Trading at trading giant Trafigura, said on Monday.
“The markets are probably a bit too relaxed,” Luckock said at the Asia Pacific Petroleum Conference (APPEC) by S&P Global Commodity Insights, as carried by Reuters.
The $72 to $88 per barrel range is the fair price for oil, he said, but added that the current supply tightness “leaves us vulnerable” to further rises in crude oil prices.
Early on Monday in Asia trade, both benchmarks were trading close to their Friday settlement at over $85 a barrel WTI Crude and more than $88.50 per barrel Brent Crude. These levels are close to the highest prices so far this year reached on September 1.
There could be “a little bit more to come” in terms of Fed rate hikes, but the U.S. economy has been “doing incredibly well” through the interest rate hikes so far, Trafigura’s Luckock told the APPEC event.
Trafigura and all other market participants and traders will be looking at Russia’s announcement this week on what the OPEC+ deal will be and whether Moscow will continue to cut supply to the market, according to Luckock.
The market expects that the Saudis will announce a further extension of the cuts into October. In addition, Russia’s Deputy Prime Minister Alexander Novak said last week that Moscow would disclose this week the parameters of the OPEC+ deal.
The issue with Russian supply is the credibility of Russia’s pledges, considering that it is difficult to track Moscow’s exports, Trafigura’s Luckock said.
“I guess the issue a little bit with the Russians has always been the credibility of the cuts,” Luckock noted.
During the same APPEC event, Russell Hardy, CEO of the world’s biggest independent oil trader, Vitol, said that the tight oil market could see some reprieve in the next two months as refineries plan maintenance, but that sour crude supply would remain tight.
By Tsvetana Paraskova for Oilprice.com
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.