- The State Department has instructed buyers to reduce oil imports from Iran by November 4.
- According to analysts, amid falling production volumes from other key OPEC countries, barrels could reach $ 100.
- Watch real-time oil trading here.
Less than a month before another round of US sanctions against Iran came into force, analysts say that $ 100 oil may be on the horizon.
Trump Administration urged buyers will reduce oil imports from Iran in an effort to put pressure on the third largest producer of OPEC to change its behavior, a step that could squeeze global supply and pressure prices that have already reached four-year highs. brant, an international indicator, is currently trading at about $ 85 per barrel.
"Higher oil prices seem inevitable, and, in our opinion, $ 100 per barrel is easily attainable," economists at Bank of America Merrill Lynch noted in a recent study, citing an impending decline in production in Iran.
Crude oil exports to Iran fell more than expected before the imposition of sanctions, even when the Islamic Republic has offered Asian customers the cheapest prices in more than a decade compared to Saudi. According to the tanker compiled by bloomberg, shipments fell by just over a quarter of a million barrels per day in September to their lowest level since 2016.
In the hope that Tehran will not advance in its nuclear program, European officials are working to protect the sale of Iranian oil from US sanctions. But the Trump administration portrayed these efforts as implausible, threatening to punish companies that are trying to circumvent their policies.
“The European Union is strong against rhetoric and weak supporters,” said John Bolton, national security adviser, said in a conference speech last month. "We are not going to allow our sanctions to avoid Europe or anyone else."
President Donald Trump turned to other oil producers to bridge the gap with the midterm elections, but the disruptions in key OPEC countries are limitations. Chelima Croft, a former CIA analyst who is currently leading commodity research at RBC, said a sharp drop in production in Venezuela and Angola leaves little room for balancing other supply risks in Libya, Nigeria and Iraq.
“The countries that can grow are very small,” she said, adding that there are questions about how long Russia can keep attraction conclusion. "At the moment it is only Saudi Arabia."
Following the requests of the White House, Riyadh said earlier this year that it could increase production by "a measurable amount. Although Saudi Arabia accounts for the lion’s share of OPEC production, some analysts are skeptical that it has enough free space to fill the gap, while maintaining adequate reserves.
Trump has repeatedly sought to OPEC to raise energy prices, even after a rare agreement was reached in June to limit production restrictions. A group of 15 members has been coordinating production levels since 2016 in an effort to combat global excess oil.
"We protect the countries of the Middle East, they will not be safe for a long time without us, and yet they continue to insist on raising and raising oil prices." the president said in a recent tweet, "We will remember. OPEC monopoly should lower prices now! ”
According to Croft, this strategy may have prompted member countries to increase production in the past, but is likely to become less effective as the global oil cushion shrinks. The output of 12 countries bound by the supply agreement actually fell by 70,000 barrels per day in September, Reuters Examination found.
“With Trump and these tweets, I think there is a loss,” she said. “With regard to moving forward, we are looking at the ever-decreasing stock of OPEC barrels. You can yell at them, but if they have no barrels, they have no barrels. ”
Although the administration has stated that it can provide a waiver of sanctions to avoid supply shocks, tactics used in the Obama era, it still retains the goal of sending Iranian oil export products to zero. The White House did not respond to the request email.
Economists from Bank of America at a price of $ 100 per barrel said that the cost of oil reduces consumer demand not only for gasoline, but also for other goods and services. TIt is expected that the level of energy prices in Britain is two times higher than the two main indicators of global growth in 2019.
“This is not a big deal, but it’s not so trivial,” they said. "Moreover, with such low levels of oil supply, any further destruction can mean a serious surge in oil prices, creating more non-linear effects on trust and growth."
On Monday, the International Monetary Fund lowered its forecast for global economic growth this year and next. The international lender led in his report “The growth of trade barriers and the reversal of capital flows to emerging market countries with weaker bases and a higher political risk.”