How Iranian factor may push oil prices above $100/bbl?

How Iranian factor may push oil prices above $100/bbl?

Baku, Azerbaijan, Dec.5

By Leman Zeynalova – Trend:

Iran is one of the main factors possibly affecting the world oil prices, by even pushing them above $100 per barrel, Cyril Widdershoven, a Middle East geopolitical specialist and energy analyst, a partner at Dutch risk consultancy VEROCY and SVP MEA-Risk, told Trend.

"If US sanctions will be increased on Tehran or Saudi-UAE will go for full confrontation with Iran, oil prices could shoot to unexpected levels within a short time. A military confrontation between them could be hitting export volumes extremely, pushing prices above $100 per barrel for sure," he believes.

Widdershoven noted that US sanctions also will take out major volumes, as they will constrict not only investments in Iran, but also overall production and export options.

The expert believes that in general, geopolitical risks, but not OPEC deal will further affect oil prices.

"The OPEC deal on its own has already had its effect on prices. To expect more to come will not be depending on this deal, but on geopolitical risk issues on the ground. The increased turmoil and implosion of Venezuela, combined with instability in Libya and Nigeria's oil regions, already puts increased supply expectations on ice. No additional volumes should be expected soon," he added.

At the same time, Widdershoven noted that Saudi Arabia and others have currently changed their overall strategy by putting more emphasis on downstream/petrochemicals.

"If this is being put in place, crude oil export volumes will go down, while petroleum products from these countries will increase," added the expert.

Earlier, OPEC announced that it, along with Russia and several other non-OPEC producers, had reached an agreement to extend its production deal for a further nine months. This would shift the expiration date of the agreement from March to the end of 2018. The agreement is on the same terms as those agreed in November last year.

Widdershoven pointed out that the cut extension was expected, as OPEC and Russia now are able to get the benefits of their long-term cooperation strategy.

"To extend between 6 to 9 months doesn’t really make a difference, as if necessary, the oil cartel will be dealing with it in extra-ordinary meetings. Overall, the deal is as expected, however, more interesting is that the key players have indicated that they are keeping an eye on the demand-supply issue. All parties don’t want the market to overheat, as this would be boosting non-OPEC or US shale supplies too much. With price ranges between $60-$70 per barrel, the market can reasonably be controlled. Demand will still increase, while supply is being hampered by less investments the last years, and increased internal turmoil in several OPEC countries," he said.

The expert believes that maybe US and OPEC will start cooperating, or demand is going stronger than expected.

"The latter is already showing some signs, while current discussions between US-Saudi in Riyadh are not only meant to be supporting friendship. Oil will be on the agenda for sure," he added.

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Follow the author on Twitter: @Lyaman_Zeyn

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