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Oil prices may surge above $80 on geopolitical instability

Austria's OMV signs concession deal with Abu Dhabi

May 01, 2018 00:00:00

KUALA LUMPUR, Apr 30 (Agencies): Instability in the Middle East and other areas could trigger volatility in the oil market, leading to oil prices potentially overshooting above 80 U.S. dollars per barrel, said a Malaysian research house Monday.

Maybank Investment Bank Research said in a report that based on past events, developments in the Middle East could be another catalyst for oil prices, and May is an important month for oil prices outlook as the United States would decide on re-imposing sanctions on Iran.

Maybank also noted the fundamentals for oil prices are improving as oil prices are running ahead of the research house estimate.

Brent crude oil prices have averaged 68 U.S. dollars per barrel year-to-date, ranging from 63 U.S. dollars to 75 U.S. dollars per barrel, and ahead of the research house 65 U.S. dollars per barrel estimate for 2018, according to the report.

"We do not rule out oil price sustaining at current levels, on improving fundamentals, aside from geopolitical supply risk," it said.

It also sees the falling global net crude supply, global crude oil inventories and offshore storage, to mitigate the risk of increased shale supply.

Meanwhile, Abu Dhabi National Oil Company (ADNOC) on Sunday signed a $1.5 billion offshore concession deal with Austria's OMV, the UAE firm said in a statement.

The 40-year deal to develop SARB and Umm Lulu offshore oilfield is the latest in a series of contracts with foreign oil companies to develop three offshore oilfields with the aim of boosting their output.

The other fields are Lower Zakum and Umm Shaif and Nasr.

ADNOC has already signed concession contracts with France's Total, Italy's ENI, Japan's INPEX and China's CNPC in addition to Spain's CEPSA and an Indian consortium led by ONGC Videsh, raising some $8 billion in participation fees, the statement said.

The deals also guarantee secure markets for around 40 percent of Abu Dhabi oil output which currently stands at 2.8 million barrels per day, ADNOC said.

ADNOC has been vying to expand its output capacity from 3.2 million bpd currently to 3.5 million bpd by the end of 2018.

Earlier this month, it invited bids for exploration contracts for six major blocks with untapped reserves of oil and gas.

ADNOC said the blocks are estimated to hold billions of barrels of oil and trillions of cubic feet of natural gas.

Home to more than 90 per cent of United Arab Emirates (UAE) oil, Abu Dhabi is auctioning off licences in its blocks for the first time.

ADNOC wants to double its refining capacity, currently at around 800,000 bpd, and tripple its petrochemicals production.

China's commercial crude oil stocks fell 2.39 per cent by the end of March, compared with a month earlier, while stocks of refined oil products edged down 0.55 per cent.

The drop was a result of increasing processing volume, despite rises in imports and output, according to data compiled by Xinhua News Agency.

Gasoline stocks went up during the period as fuel demand retreated after the Spring Festival Holiday. In March, China's exports of gasoline jumped 104.5 per cent from the previous month.

Demand for diesel picked up as construction activities accelerated after winter ended. During the period, exports of diesel surged 150.7 per cent.

Data from the National Bureau of Statistics showed China's crude oil output came in at 190 million tonnes in 2017, down 4.0 per cent from a year earlier.

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