Oil production is skyrocketing but a glut is unlikely, one analyst argues: File Image/Pixabay.
Global crude recovery growing far quicker than analysts predicted was cited as the reason for another session of losses on Monday for two key benchmarks; however, remarks made by U.S. president Donald Trump suggested that hostilities – and escalating oil prices – between the U.S. and Iran could easily resume.
After Iranians vowed revenge during the funeral of their supreme leader Ayatollah Khamenei, Trump told media that if a peace deal wasn’t reached, Washington would “finish the job” it started months ago, adding that it would completely dismantle the country’s infrastructure “in a small part of an afternoon.”
Still, Brent settled down 13 cents at $71.99 per barrel, and West Texas Intermediate settled down 14 cents at $68.55 per barrel.
“
There will be more conflict, there will be more trouble
Fereidun Fesharaki, chairman emeritus, FGE NexantECA
Giovanni Staunovo, analyst at UBS, explained why traders weren’t spooked by the sabre-rattling between the U.S. and the Islamic republic: “The downward move is still influenced by earlier stranded tankers managing to exit the [Persian] Gulf, resulting in an increase in oil on water.”
Indeed, investors and analysts alike continued to witness oil ramping up elsewhere at an unprecedented rate: having quit its membership with the Organization of the Petroleum Exporting Countries (OPEC), the United Arab Emirates raised its crude output to near record highs above 3.8 million barrels per day (bpd) in June, according to sources.
Meanwhile, OPEC on Sunday agreed to increase output targets by 188,000 bpd from August, in addition to increases for June and July.
Also, Saudi Arabia set the official selling price for its flagship Arab Light crude to Asia in August at $1.50 per barrel below the Oman/Dubai average, and this caused Robert Yawger, director of energy futures at Mizuho, to remark, “It is increasingly looking like the Gulf producers are gearing up for a price war.”
However, at least one analyst thought the mounting fears of an oil glut were unfounded, due to peace between the U.S. and Iran being extremely unlikely.
Fereidun Fesharaki, chairman emeritus of FGE NexantECA, told media that he found it “impossible to imagine” both countries reaching a lasting peace deal and added, “There will be more conflict, there will be more trouble, this is not the end of the story; this is the beginning of the story.”
Fesharaki also said that as a result, while up to 75 percent of the previous oil flows through the Strait of Hormuz are expected to return to the market by the end of the year, significantly lower oil prices aren’t guaranteed for 2027.
Ship & Bunker News Team
To contact the editor responsible for this story email us at [email protected]