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Opec And Trump Go Head-To-Head, Chances Of Oil Price Spiking: Analysts


09/29/2018


Opec And Trump Go Head-To-Head, Chances Of Oil Price Spiking: Analysts
Amidst speculations by traders that the global price for crude would touch the $100 a barrel mark by the end of the year, Opec and United States President Donald Trump are both exhibiting a "show me" attitude to the uncertainty in the energy market.
 
"The market and certainly the U.S. president is saying to OPEC and Saudi Arabia: 'Show me the barrels,'" Herman Wang, OPEC specialist at S&P Global Platts, told the media in a interview.
 
"And Saudi Arabia and OPEC have kind of turned around and said: 'Well, show me the demand,'" he added.
 
Opec was urged to increase production by Trump last week so that the global price of oil could be maintained under control especially before the mid-term polls in the US in November.
 
This appeal to the Middle East based oil curtail assumes significance because the Trump administration is all set to impose financial sanctions on Iran from November targeted at the oil sector of Tehran which would bring down the total oil supply in the world. Additionally, a number of importers of Iranian oil have also been urged by the US to stop buying oil from Iran and bring down t heir import to zero.  In May this year, Trump had taken the US out of the 2015 Iran nuclear deal alleging that the deal was not being followed by Iran. Subsequently he announced the imposition of fresh sanctions on Iran.
 
While it was expected that very few of the Opec and non-Opec oil producers would immediately agree to the call by Trump top ramp up production, it is now expected that Saudi Arabia will silently produce more crude in the next couple of months.
 
The big question in the oil market right now is whether any potential supply disruptions can be offset by ramping up production levels by Opec and non-Opec producers, Wang said. According to the claims by Saudi Arabia, it has the capacity to add about 1.5 million barrels per day (bpd) to the supply of crude should the need arise.
 
But according to independent experts, that claim of capacity expressed by Saudi Arabia has never been put to the test before and even if the leader of Opec were to achieve it, it would set a precedence for other producers to follow to increase production which would then be difficult to control.
 
Shortage in the global supply if crude is anticipated once the US sanctions of Iran sets in. The estimation of the amount of oil that will vanish from the market however has varied versions./
 
According to some analysts, the shortage could be to the tune of about 500,000 bpd while there are other show predict that about 2 million bpd could be the shortfall in the global crude supply because of US sanctions on Iran.
 
"Even against this backdrop of a firmer dollar and potential demand destruction, talk of $100 a barrel is rife," Stephen Brennock, oil analyst at PVM Oil Associates, said in a research note published Friday.
 
"While we see such predictions as premature, one thing is clear: the ascent in oil prices shows few signs of capitulating," he added.
 
(Source:www.cnbc.com)


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