Baku, Azerbaijan, Oct.17
By Leman Zeynalova – Trend:
The oil market is facing a high level of uncertainty, international energy expert Edward Chow told Trend.
He noted that since the Trump administration's announcement of withdrawal from the Iran nuclear deal, oil price has risen from low 60s to over $80 this year.
“The precipitous drop in Venezuela production has tightened supply. Geopolitical risks in the Middle East have increased. This all contributed to the increase in oil price,” said the expert.
Chow believes that it is not yet known how effective unilateral US oil sanctions against Iran will be.
“Multilateral sanctions against Iran last time cut production by over 1 million barrels per day. The Trump Administration aims to cut almost all of Iran oil and condensate exports of 2.5 million barrels per day. US shale oil production increase cannot replace such a large volume, nor is it a substitute for the type of oil Iran exports,” he said.
At the same time, the expert pointed out that the higher oil price these uncertainties has already generated may dampen global oil demand, particularly at a time when major central banks are reducing monetary stimulus and trade tensions are slowing global economic growth.
“The danger for the oil market is we may see a repeat of 2008 when rapidly rising oil price which was driven by geopolitical risks, not fundamental supply or demand, was followed by an even more spectacular collapse in oil price.”
Sanctions are due to be re-imposed on Iran's oil industry on November 4. The move comes after US President Donald Trump decided to withdraw his country from the 2015 nuclear deal in May.
The US has said that countries or companies that conduct transactions with Iran are liable to face secondary sanctions.
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