Geopolitical Tensions won`t Lead to Oil Market Shock

The brief spike in Middle East tensions as the US and Iran faced off has served as a reminder of the havoc disruptions in supply from the key oil producing region could wreak on the global economy. the International Energy Agency (IEA) said on Thursday.

But it said ample stocks and production elsewhere mean the world is relatively well placed to react to a crisis.

Washington and Tehran are currently in a standoff after tit-for-tat military actions over the past two weeks that had sparked fears of a large-scale confrontation that could choke off the Strait of Hormuz through which 20 per cent of global oil supplies flow.

`We cannot know how the geopolitical situation will play out over time. but for now the risk of a major threat to oil supplies appears to have receded.` the IEA said in its latest monthly report on oil markets.

It noted that oil prices have receded after jumping $4 per barrel. much as they did in September when a series of attacks on Saudi oil facilities briefly knocked out part of the production of the key exporter.

`Today`s market where non-OPEC production is rising strongly and OECD stocks are nine million barrels above the five-year average. provides a solid base from which to react to any escalation in geopolitical tension.` said the Paris-based organization. which advises industrial nations that are members of the Organization for Economic Cooperation and Development on energy policy.

`As a back-up resource. the value of strategic stocks has once again been confirmed.`

The oil market has been driven in recent years by a surge of non-OPEC production that has outstripped demand. with OPEC and its allies moving to restrain production to support prices.

The IEA`s forecasts see faster growth in demand for oil this year thanks to expectations that global growth will pick up as trade tensions diminish.

However. the 2.1 million bpd growth in non-OPEC supplies will far outpace the increased demand of 1.2 mbd. putting further pressure on OPEC and its allies to further cut production.

China`s US crude buying binge to set off global sweet oil shake-up  

Meanwhile. sharply higher Chinese purchases of US energy products as part of the China-US trade deal will shake up global crude oil trade flows if American supplies squeeze rival crudes out of the top oil import market. trade sources said.

China`s pledge to buy at least $52.4 billion worth of US energy products over the next two years can only be met through substantial increases in crude imports from the US.  according to traders and analysts.

But to make way for any surge in American shipments Chinese importers are expected to dial back orders of similar or pricier grades from places such as Brazil. Norway and West Africa – potentially triggering a shake-up of the light sweet crude oil market that could span the globe.

`US crude is always a good choice to diversify supplies and press down West African crude prices.` said a source with a Chinese state-owned oil company. while adding that freight rates were now very high.


About core

Check Also

Russia Says Half of Gazprom Clients Abroad Opened Ruble Accounts

Around half of Gazprom PJSC’s foreign clients have complied with a request from Russia’s president …

Leave a Reply

Your email address will not be published.