What will be immediate market reaction to Nov.4 Iran sanctions?

Oil&Gas Materials 1 November 2018 14:50 (UTC +04:00)

Baku, Azerbaijan, Nov.1

By Leman Zeynalova – Trend:

Main reaction in the oil market to Nov.4 sanctions of the US on Iran is to be expected 2-3 weeks after the sanctions in place, as OPEC needs to have a strategy in place for 2019, Cyril Widdershoven, a Middle East geopolitical specialist and energy analyst, a partner at Dutch risk consultancy VEROCY and SVP MEA-Risk, told Trend.

He believes that the main discussion will be if there will be a new production cut agreement, lowering overall production to quell a new possible oil glut (short term).

“This is also needed to keep prices high enough to reach enough investment levels to have production in coming years to increase to 110-120 million bpd. If not high oil prices, no investments, and this will result in a supply crunch not seen yet,” said the expert.

The immediate reaction could be still one showing fear of a real Iranian oil export at zero, he said.

The expert pointed out that even though markets have been taking into account the possible price increases due to the lack of Iranian oil on the market, some upward pressure still could exist.

“At this time, it is rather unclear what the real situation will be on November 4 or let’s say the 2-4 weeks after. Iran has been pushing its production capacity to the limits, pushing as much oil and petrochemical products as it can into the market the last weeks. The latter is part of the price decrease we seen in the market at present. However, if US will not put all sanctions in place, but also has the power to take SWIFT (international financial transactions) to a zero level for Iran, we will see a spike for sure,” Widdershoven noted.

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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