Saudi Arabia has already pledged to ramp up output to offset disruptions to Iran's oil exports.
- Trump's move fails to dent markets as crude rises.
"Opec is a non-political organisation. Our goal is to ensure the stability of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry," he wrote on Twitter.
Saudi Arabia has already pledged to ramp up output to offset disruptions to Iran's oil exports. The leading Gulf oil exporter, which has been leading efforts since 2017 to withhold production to prop up prices, said it would work with other producers to lessen the impact of any shortage in oil supplies.
US President Donald Trump on Tuesday pulled out of a deal with Iran, casting uncertainty over global oil supplies. He said the US would re-institute sanctions against Iran and warned of secondary sanctions on any nation that helps Iran pursue nuclear weapons, as well as any US or foreign companies and banks that continue to do business with the country.
Brent crude oil touched its highest since November 2014 at $77.20 a barrel. The benchmark contract was up $1.80 a barrel, or 2.4 per cent, at $76.65. US light crude was up $1.70 a barrel, or almost 2.5 per cent, at $70.76, near highs also last seen in late-2014.
Analysts see upside risks of Brent rising above $80/b and WTI above $75/b, given that President Trump's language was hawkish in tone with the scale and scope of sanctions being instituted at the "highest level".
They said in the near-term, Gulf countries could actually benefit from the new development. "If Saudi Arabia boosts oil output that would directly boost GDP growth. Other Gulf countries will benefit from the rise in oil prices that will help to improve budget and current account positions and the pace of fiscal austerity will slow," analysts at Capital Economic said. "Trade ties between Iran and the rest of the region are relatively small. The main exception is the UAE, where exports to Iran are equal to around five of GDP," analysts said.
However, most experts agreed that the impact of the current crisis on oil supplies may be less severe than in 2012, when sanctions on Iran were tightened.
"So long as Iran sticks to its nuclear commitments, the EU may not deem it necessary to re-impose its sanctions on shipping insurance which were crucial in disrupting oil exports last time. It is also likely that Iran would be able to export oil to countries less concerned about US sanctions, especially in Asia," analysts at Capital Economics argued.
Monica Malik, chief economist at Abu Dhabi Commercial Bank, said new sanctions on Iran are likely to cause global crude inventories to decline further, though this could be mitigated by other producers increasing their output.
Along with Saudi Arabia, other producers such as Russia also have spare capacity. US shale production has also continued to increase, which will reduce supply-side constraints. "Overall, we see greater uncertainty over the nuclear deal in the upcoming months, which will likely keep upside pressure on the oil price," said Malik.
"The Iranian oil sanctions during the Obama era reduced Iranian crude oil production by one million barrels per day," Chris Lafakis, an energy economist for Moody's Analytics, said. "The US sanctions announced today are expected to result in a decline in Iranian crude oil production of 400,000 barrels per day. What made the multilateral sanctions enforced during the Obama era so effective was precisely the fact that they were multilateral, whereas President Trump's sanctions are not."
Ehsan Khoman, head of research for Mena at MUFG, said Russia, China, Turkey and India would likely oppose the sanctions and keep their current levels of Iranian crude purchases.
Mihir Kapadia, CEO of Sun Global Investments, said with sanctions re-imposed on Iran, countries including China and India, the largest consumers for Iran crude and gas, will have to look for other sources.
"The deal could mean Iran would be effectively out of the oil markets soon, meaning the market re-calibration would consolidate under Opec and US. Under such a scenario, the price forecast looks bullish," he added.
"Investors should expect an increase in market volatility following Trump's announcement that he is quitting the Iran nuclear deal," said Tom Elliott, international investment strategist at deVere Group.
"There will be global stock market sell-offs as the world adjusts to the news. Due to the severity of the US President's approach, in the shorter term at least it is likely gold and the dollar may rally on growing fears of further conflicts in the Middle East breaking out; and risk assets, namely stocks and credit markets, may weaken. Oil may rally strongly," he said.
No comments :
Post a Comment