Crude oil supply is tight
Prices at the mercy of speculators
Despite the assurances from the three biggest oil producers – Russia, Saudi Arabia and USA, the oil market remains jittery, causing the oil prices to be at the mercy of financial speculators. Oil prices will remain close to the level of $80 despite warning from the American administration about its disapproval and the harm to its loyal voters who were promised that the gasoline prices will be brought down to less than $3 per gallon.
Oil supply will become insufficient when the Iranian oil export is suspended. Markets will lose close to 1.2 million barrels when the sanctions come into force in November, as no countries will be able to import Iranian oils. The current oil situation is tight without much spare capacity at hand, particularly with the three big oil producers.
The uncertainties surrounding other oil producing countries are making the oil industry nervous and unstable. Countries like Venezuela just can’t sustain its production. Libya on the other hand is not sure how much oil can be produced on a monthly basis with ongoing chaos surrounding its oil fields and export terminals. Such uncertainties also include other unforeseen elements such as a possible hurricane in the USA without knowing the extent of its impact on the domestic production and inventory.
The factors that are not regarded to cause uncertainties but make the oil market nervous and unstable for some time to come include the oil market conditions. Alternatively, the USA administration will waive its conditions for some countries in an attempt to bring oil prices to a reasonable level that would be close to $70 per barrel. All this depends on the direction taken by the oil price.
The other question is – For how long will the sanctions on Iranian oil last? It could take some years, especially with the increase in demand for oil, and the problems surrounding the production of USA shale oil. This will certainly push oil prices to reach beyond $80 level without a breakthrough between the USA and Iran.
For the time being, oil markets will remain jittery in favor of oil speculators and oil producing countries but with a negative impact on the global commercial trade.