Oil market will see a continued, sustained lower price environment unless the cartel ups its cuts by a further, and somewhat unlikely, 1 million bpd.
Share to twitterGeopolitically things haven’t materially improved since tensions between the U.S. and Iran escalated early in the second quarter of the current oil trading year. If anything, it can be argued that Iran’s recent seizure of British flagged Swedish-owned, swiftly followed the U.S. deployment of its aircraft carrier USS Abraham Lincoln, Carrier Strike Group 12 and U.K. warships have ratcheted things up a notch.
Such concerns have prompted the International Energy Agency to lower its global oil demand growth forecasts for 2019 and 2020 to 1.1 million and 1.3 million barrels per day , respectively. Many analysts, myself included, have been accused of complacency and giving too much weight to demand concerns and not paying enough attention to supply concerns.
I dispute that. Quite the contrary, a supply-side examination in step with a demand-side observation suggest to me that the oil market will see a continued, sustained lower price environment. I am neither predicting a collapse nor a spike, and unlike many others, I am not overtly focused on an uptick in U.S. production.
Curiously, Iranian exports while falling are not down to zero and will be never be so, because Tehran is an expert at exporting in the shadow of sanctions. Given Washington and Beijing are trading economic salvos, few expect China to be compliant at unilateral U.S. sanctions on Iranian oil.
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