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Oil Could Be Closing In On $100 A Barrel - Experts

Oil Could Be Closing In On $100 A Barrel - Experts
Oil investors are increasingly feeling that the price of crude would touch the $100 a barrel mark before the year-end because of the rising prospect of an abrupt shortage of supply the energy market.
There has been an appreciation of more than 25 per cent in oil prices this year which has encourages analysts to predict global crude prices touching the triple digit mark very soon. .
In recent months, there have been a number of issues that threat to create supply side concerns including the impending sanctions on Iran by the US president Donald Trump, increasing bottlenecks in the U.S. shale industry and absolute collapse of the Venezuelan economy. This has created an upside risk in the energy market.
Crude futures appeared uniquely "sensitive" to market commentary at present, "with policy and messaging having an exaggerated impact on prices", said Cailin Birch, senior commodities analyst at the Economist Intelligence Unit, in a recent television interview.
"And, clearly, what is particularly important right now is the prospect of Iranian sanctions," Birch said.
The US sanctions on Iran is schedule dot become effective from November 4. It is expected that the sanctions will immediately restrict export of Iranian oil – the third largest producer of Opec. However, experts have not been able to agree on the quantum of supply shortage because of the sanctions on Iran and the estimates vary significantly.
There are some experts who have predicted a supply shortage of about 500,000 barrels per day (bpd) from Iran because of the U.S. sanctions while there are others who have predicted a shortage of at least 2 million bpd in the global supply.
There is also increasing pressure on global importers of oil by the US of not to purchase oil from Iran and to bring down Iranian imports to zero. This move by Washington is a part of its strategy to force Iran to come to the negotiating table on the nuclear deal by crippling its economy which depends a lot on its oil exports.
There have however been indications from the Trump administration that it could think of exceptions for those countries which have already exhibited efforts to cut down on import of Iranian oil.
"Definitely. This kind of mixed messaging is just one step forward and then one step back", Birch said while replying to a question of whether the Trump administration's recent suggestion of possible waivers and exemptions had fuelled market uncertainty.
"Putting everything together, we think $100 oil could take two tenths off global growth in 2019. This is not a major impact, but it isn't trivial either," economists at Bank of America Merrill Lynch said in a research note published Friday.

Christopher J. Mitchell

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