Brent crude is likely to trade in the range of $70-$80 (Dh257.11-Dh293.84) per barrel in the coming days due to supply concerns stemming from the decision of US President Donald Trump to reimpose sanctions on Iran, one of the biggest producers of oil in the world.
According to analysts, Iran’s crude oil exports have fallen sharply due to US sanctions, with the Islamic republic exporting 1.68 million barrels per day of oil in July, which is some 640,000 barrels per day below the average for the month.
“This will undoubtedly raise pressure on the remaining Opec [Organisation of the Petroleum Exporting Countries] members and also raise the question whether they will be able to meet the potential shortfall — not only from Iran but also from Venezuela which continues to deteriorate,” Ole Hansen, head of commodity strategy at Saxo Bank, said in a note.
Trump reimposed sanctions on Iran earlier this year, prompting countries such as India to look for other ways of importing oil to meet their growing energy demand. India is one of the biggest importers of oil from Iran.
“We maintain the view that Brent crude oil is likely to remain range-bound within a $70-$80 per barrel range. With the short-term focus switching to supply we see some additional upside potential towards $80 per barrel,” said Hansen.
On the other hand, Ehsan Khoman, director and head of Mena Research and Strategy at MUFG Bank, told Gulf News that despite geopolitical concerns, stemming from the magnitude of Iranian oil supply risks, investors continue to remain concerned over the re-emergence of oversupply.
There are concerns about a supply glut on both sides of the equation, Khoman said, adding that on the supply side, there is the nominal one million barrels per day revival in Opec and non-Opec members’ production to minimise upside price volatility for consumers in oil-importing nations.
On the demand side, the increasingly uncertain macroeconomic outlook, due to global trade tensions, is lowering the growth in the requirement for oil.
“Looking ahead this week, markets will closely watch the Opec and non-Opec members’ Joint Technical Committee scheduled on Monday, 27 August to review the implementation of oil-production cuts, which have been historically high over previous reviews,” Khoman said.
“From a pricing perspective, if oil prices fall below $70 per barrel range, then our expectation is that Saudi Arabia and other producers with immediate spare capacity [the UAE, Kuwait and Russia], would intervene to support prices.”
International benchmark Brent was trading at $75.82 per barrel, up by 1.46 per cent at the time markets closed on Friday. US crude, West Texas Intermediate, was at $68.72 per barrel, up by 1.31 per cent.
Source: Guf News