Explosion in Lebanon will not affect world oil market

Explosion in Lebanon will not affect world oil market

BAKU, Azerbaijan, Aug.7
By Leman Zeynalova – Trend:

The huge explosions in Lebanon will not affect the world oil market, Francis Perrin, Senior Fellow at the Policy Center for the New South (PCNS, Rabat) and at the French Institute for International and Strategic Affairs (IRIS, Paris), told Trend.

“On ICE Futures in London the price of North Sea Brent (October 2020 contracts) is nearing $45 per barrel after a rise to over $46/b on Wednesday but this relatively high level (relatively, which means taking into account the Covid 19 pandemic and the world economic crisis) is not at all the consequence of the tragedy in Beirut. The main explanation of the recent rise in oil prices is the strong fall in U.S. crude oil stocks. According to the U.S. Energy Information Administration (EIA), which is part of the U.S. Department of Energy, crude stocks fell by 7.4 million barrels in the last week of July. The EIA published this statistic this week and it had a significant bullish impact on oil markets,” said Perrin.

He pointed out that apart from the evolution of U.S. oil stocks, which is very closely followed by oil traders around the world as the U.S. is the biggest market for oil, oil prices in the recent days have been under pressure due to the Covid 19 pandemic, which is growing, and the strong tensions between the two main powers of our time, the U.S. and China, which are increasing every day.

“These two factors are rather bearish as far as the oil market is concerned. A new ''cold war'' is obviously not very good for the world economy, which is already suffering from the pandemic,” said the expert.

Perrin pointed out that clearly the explosions in Beirut did not have an impact on oil prices in the recent days and will not have in the future.

“Lebanon is not an oil producing and exporting country; it is not a major oil importing and consuming country; the explosion is not related to crude oil or to refined products or to natural gas or to other energy sources or products but to ammonium nitrate, which is used for fertilizers (and also for explosives); the port of Beirut is not a major facility for oil trade; and what happened in Beirut did not negatively impact the production, transport and export of crude oil and refined products from the Middle East to the rest of the world,” noted the expert.

He noted that the Beirut explosions are of course a huge tragedy in terms of deaths, casualties, homeless people, destructions, costs, damages to buildings, vessels, infrastructure and grain silos and impact on the Lebanese population and economy.

“The Lebanese authorities want to displace maritime traffic from Beirut to Tripoli as the Beirut port has been destroyed by the explosions. The Tripoli port is now Lebanon's main port due to these explosions in Beirut but it will take some time for this port to ramp up its capacities in order to be able to welcome vessels and cargoes which could be re-routed from Beirut to Tripoli. What happened will also increase Lebanon's dependence on imports, which was already very high, including food imports,” Perrin concluded.

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Follow the author on Twitter: @Lyaman_Zeyn

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