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Both supply and demand for oil could be hit by political risks in the months ahead. the International Energy Agency has said. as the US reapplies sanctions on Iran and pursues trade disputes with China and other partners.
The US began reactivating sanctions on Iran this week. following President Donald Trump`s withdrawal earlier this year from a multilateral nuclear deal reached in 2015. Measures targeting Iran’s oil exports will take effect in November. though its shipments have already started to fall off as purchasers anticipate the sanctions. the Paris-based agency said in its monthly report released today.
“During the last round of sanctions. crude oil exports fell by 1.2 million barrels per day. and this time the impact could be even more severe.“ the IEA said. “As oil sanctions against Iran take effect. perhaps in combination with production problems elsewhere. maintaining global supply might be very challenging and would come at the expense of maintaining an adequate spare capacity cushion.“
Nevertheless. there have been no signs yet of a shortage of supply on the crude oil market. The IEA has revised down its 2018 average price forecasts this month to $71.80 a barrel. about $2 lower than its forecast last month. That’s higher than in recent years. but still a long way off highs above $115 a barrel seen in summer 2014.
Saudi Arabia. traditionally the world’s swing producer. has lowered its output over the past month. which the IEA attributes to subdued demand in Asia. That implies that the top global exporter has plenty of spare capacity to meet shortfalls elsewhere — though perhaps not quite enough to entirely offset the upcoming Iranian embargo.
The US`s growing trade dispute with China and spats with other trading partners are likely to dampen demand growth. the IEA said.
Not only will these disputes squeeze the global economy. which drives oil demand. they will also cause a reduction in ocean-bound trade. which will translate into weaker demand for shipping fuel.
