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– Despite the imminent return of US sanctions against Iran, the price of oil may even fall. It would be good news for Polish drivers – writes Wojciech Jakóbik, editor-in-chief of BiznesAlert.pl.
Oil prices are falling despite the Iran effect
Internal report of OPEC oil cartel which the Wall Street Journal got access to, contains a forecast drop in oil prices due to the increase in inventories and crude oil production in the US. – The upcoming seasonal fall in demand may increase the level of stocks of petroleum products. With the increase in production in the US it could be another factor lowering oil prices in the coming weeks – reads the report in WSJ. According to OPEC, it is difficult to forecast the demand in 2019 because of US trade disputes with other countries. OPEC has already lowered the barrel price growth forecast.
The oil agreement is at risk
In October, at the OPEC meeting, member countries discussed methods of responding to the decline in oil supply caused by the return of US sanctions against Iran. They significantly reduce the possibility of importing raw materials. In response to these concerns Saudi Arabia and Russia (non-OPEC countries, but with the oil agreement of the OPEC +) to increase production despite concerns already other cartel members of oversupply.
Saudi Arabia warned the US that it can use its position on the market of raw materials in case of a sanction after the murder of Jamal Khashoggi, a journalist criticizing the Saudi Saud dynasty, who was killed in the Saudi embassy in Istanbul. Despite threats, Riyadh is pumping more and more oil. From May, it increased its output by almost 700,000 barrels a day to 10,7 million barrels. It announces further hike in November.
Russian companies behave similarly. Gazprom Neft announced in London that it has a free hand in mining policy. – We were not limited by the government to increase extraction above the levels from 2016 – admitted Vadim Yakovlev, vice-president of the company. He admitted, therefore, that Moscow did not expect him to reduce production to the levels set in the oil agreement. It assumes a coordinated reduction of oil prices by a total of 1,8 million barrels in order to raise oil prices after the crisis of 2014-16. It is not known whether the oil agreement remains in force.
Price war?
If, according to economic forecasts, demand will not grow in line with the expectations of the largest oil suppliers, they will have to fight for customers, especially in China. OPEC lowered the forecast for the growth of global demand for crude oil in 2018 by 80,000 barrels a day to 1.54 million barrels. The forecast for 2019 was reduced by 50 000 to 1,36 million barrels per day. The demand forecast in 2018 was reduced by 30,000 barrels per day to 98,79 million barrels per day and by 80 thousand to 100,15 million barrels per day in 2019 years. This resulted in a reduction of the projected Brent barrel price by 1,95 percent to $ 81,47 per barrel in December 2018.
It would be a return to the price war and the abandonment of a coordinated policy with the oil agreement. In the first place, it would end with the leveling of the so-called Iran’s effect, but if competition persisted, it could even significantly reduce the price of the barrel. Will we have a new depression of oil prices and gas price drops for Christmas 2018?
