Despite Saudi Arabia’s assurance to the global oil producers about provision of adequate supply, prices will continue to be unsettled even after Nov 4, which is the date set for the launch of USA boycott on the export of Iranian crude oil. Oil market will lose about two million barrels of Iranian oil which has to be replaced by Saudi Arabia and perhaps Russia.
However, it is doubtful whether these two countries, along with Kuwait and United Arab Emirates, can fill this gap. There is the risk of other producers failing to produce due to various reasons, which can in turn push the oil prices up to above $80.
If not, the oil prices will remain jittery and unstable for months to come, and will be swinging on a daily basis without any firm direction. The countries that could shake the oil prices are Venezuela, Nigeria, Libya and Angola. The oil prices can rise to above $80 per barrel in case of any stoppage or reduction in their crude oil production.
In view of such reduction, Saudi Arabia will not be able to enhance its production overnight to a new level of 11 million barrels or above on a sustainable basis. Libya and Nigeria can push the oil prices to the level of $90 with any shutdowns of its oil fields or blockage of its terminal or due to political reasons in case of incidents such as a labor strike.
These two countries can really put oil market on its edge in the near future. All of the above are the known factors, but there are other factors outside of OPEC, North Sea oil production, Canada or Mexico or Brazil. Any of these unknown factors can go out of hand and cause the market to heat up.
To lose two million barrels of crude oil will cause some serious disruptions, but the current American administration can ease the pain and pressure on oil-producing countries by paving way for some flexibility by allowing Turkey and South Korea to keep importing oil from Iran and others. From next month onwards, oil prices will behave like a swing without any direction, and it will be anybody’s guess about the price level of the oil barrel; in fact, $100 is certainly not out of reach.
By Kamel Al-Harami Independent Oil Analyst
Email: naftikuwaiti@yahoo. com