prices rise but possible battle for market share caps
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[April 26, 2016]
By Dmitry Zhdannikov and Amanda Cooper
LONDON (Reuters) - Oil prices rose on
Tuesday, boosted by a weaker dollar and by expectations that demand
could grow quickly enough to match supply this year, although concern
over a potential battle for market share between Saudi Arabia and Iran
Front-month Brent crude futures were up by 59 cents to $45.04 a
barrel at 1122 GMT (6:22 a.m. ET). U.S. crude futures rose 54 cents
to $43.18 a barrel.
"Market fundamentals continue to suggest that the combination of
robust demand and weak supply growth will move global oil markets
closer into balance by the end of the year," BP Chief Executive Bob
Dudley said in a statement after the firm reported
Helping prices were a weaker dollar and a rush of new investment
into crude futures.
The oil price has risen by nearly 14 percent in April, putting it on
track for its largest monthly gain in a year.
However, some analysts warned it was too early to call an end to the
crude glut as Saudi Arabia and Iran could ramp up output further in
a race for customers.
"The biggest bear risk to the oil market right now is that Iran's
ramp-up accelerates and then that Saudi Arabia does the same," Citi
said in a note to clients.
"If anyone had a doubt about Saudi Aramco's ability to use its
logistical system and spot sales to increase market share, its
recent 730,000-barrel sale of a cargo to a Chinese teapot refiner in
Shandong should lay any doubts to rest," it said.
The cargo will be lifted in June from Aramco's storage in Japan's
Okinawa prefecture and shipped to China's eastern province of
Shandong, Reuters reported.
Citi said it was likely that Saudi Arabia was targeting 500,000
barrels per day (bpd) in new sales to bring its production up to at
least 11 million bpd.
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BMI Research said it had upgraded its Saudi crude production
forecast, "reflecting the failure of the meeting at Doha, planned
increases in output capacity and the creeping politicization of oil
under Deputy Crown Prince Mohammed bin Salman".
On April 17, a deal to freeze oil output levels by OPEC and non-OPEC
producers fell apart after Saudi Arabia, during talks in the Qatari
capital of Doha, demanded Iran join in.
BMI said it expected Saudi output to average 10.3 million bpd, up
from a previous estimate of 10.2 million bpd.
Iran wants to return to its pre-sanctions production level of 4
(Additional reporting by Henning Gloystein in Singapore; editing by
Dale Hudson and Jason Neely)
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