Oil prices are bound to remain low over the next couple of years. but two potential events could send them either higher than today’s levels or sinking into the $30s—new U.S. sanctions on Iran or OPEC failing to extend the production cut deal beyond March 2018. Jeff Brown. president of consultancy Facts Global Energy (FGE). told the Reuters Global Commodities Summit on Wednesday.
Even though the oil market now looks tighter than last year and earlier this year. inventories will likely stay high next year and in 2019. so there will be no big drivers for oil prices to materially rise. according to Brown.
However. one potential upside for the market would be the U.S. imposing fresh sanctions on Iran.
“While the U.S. appear to be going alone on this. we have seen in the past that U.S. sanctions alone can be very effective.“ Brown said at the Reuters summit.
“U.S. sanctions could cut off a lot of Iranian oil trade finance. Last time we saw this. it cut off 1 million bpd of supplies. I don’t think it’d be that big this time round. but it would still be significant.“ Brown noted.
Referring to the possible downside risks for oil prices. the FGE president. like almost all analysts. believes that OPEC should extend the production cuts to prevent a new surge in oversupply and a slide in the price of oil.
Should OPEC decide not to extend the cuts. oil prices could easily drop into the $30s again. according to Brown.
FGE’s president is also part of the group of industry experts who think that oil prices may never return to $100. and expects prices in the long term to remain not much higher than $70 per barrel.
“You can’t have a balanced market at $100. when every single project will happen. We therefore have to get used to long-term prices not much above $60 or $70.“ said Brown. who sees peak demand around 2030 due to the rise of EVs and improved fuel efficiency.
Tags Donald Trump Efficiency International International News Agency International Organizations Iran Market North America Oil Market Oil Price Oil Price Oil Trade Organization of the Petroleum Exporting Countries (OPEC) Production Reuters International News Agency Sanctions Trade United States of America World Health Organization (WHO)
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