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US sanctions against Iran are now really starting to make themselves felt. Contrary to what the European media reports, Iran's oil and gas exports are plummeting. Tehran's ability to supply its Asian clientele has been largely blocked, with Washington having decided not to extend the waivers granted to China, India or other countries to continue signing crude contracts.
US President Trump still boasts that Iranian exports will drop to zero, but some oil companies will still slip through the cracks. The "illegal" trade in crude oil will, however, be almost negligible, as Iran's major customers have realized that Washington's wrath is real. The mullahs' regime in Iran has also trusted a possible European response, but European companies have chosen to be very cautious and not to rely on the EU to limit any US sanctions against their operations. The firmer line adopted by Washington, backed by Arab allies, seems to work as long as analysts keep an eye on the options of the Iranian oil sector.
Oil analysts are also not worried about the negative impact of sanctions because world markets are still relatively well supplied. However, this picture could change extremely quickly if several underestimated factors begin to manifest themselves.
Unlike the general report, in which a direct Iran-United States report. the confrontation seems to be in progress, the reality shows that a surprising risk is in Iraq. Analysts focus on the Arabian Gulf, as a result of Washington's announcement of a large US naval force in the region, partly to project US military might and counter a possible Iranian attempt to block the Strait of Hormuz. But the real conflict could be played in Iraq.
Washington admitted to being warned of possible attacks by Iraqi militias or IRGC proxy groups in Iraq against US forces. The latter, as Tehran officials said, would be not only in Iraq, but potentially in the whole region. Tehran's approach to proxy war is long overdue, as Iran understands that a full-fledged military confrontation with the United States, and potentially its Arab allies, would not end well for the mullahs. Even if the conflict would be costly for both parties, the result is clear. Related: High cost oil faces an existential risk
This strategy, as it has been used by Iranian troops of the Iranian Monitoring Group in Syria, Lebanon, Yemen and parts of Iraq, would be much harder to repress. Not only would the United States be forced to disperse its forces, but intensive, low-intensity military operations conducted mainly in civilian areas would also limit US intervention. It would also be very difficult for Washington to compel European allies and the international community to form a united front against Iran.
Several analysts have already suggested that the first possible battlefield of this impending conflict would take place in Iraq. US Central Command spokesman Urban recalled that "the USCC has been assisting with preparations by Iran and its proxies to attack US forces in the region." US forces based in Iraq are the easiest to attack. Iraqi Shiite militias are spread throughout the country and most often operate under the flag of the Iraqi government.
Given the presence of extremist fundamentalist groups in the region, Tehran can be a powerful force without formally taking part in attacks against the United States. The same could be done in Syria or Yemen, targeting US forces and its allies in the region. By using Hezbollah or Hamas, Tehran would even be able to trigger a large-scale regional war, forcing Israel to take part in the conflict. Related: China should reach its goal of shale gas production of one kilometer
Proxy wars in several Middle Eastern countries could have a detrimental effect on global oil and gas markets. Any disruption of oil and gas flows can not be countered by an increase in OPEC production, or even by American shale oil. The market may seem well stocked and stocks are still relatively high, but this reality may soon change.
Until now, the market is behaving like an ostrich. Put your head under the surface and convince yourself that there is enough crude, or that "opening the faucets could quickly add the missing barrels". The war looming in the Persian Gulf is only assessed on the basis of a military invasion of Iran by the United States, which is unlikely.
If the Iranian regime realizes that it is heading towards the edge of the precipice, its proxies will make their choice. In the global oil market, volumes are no longer the only factor of importance. It's raw qualities and qualities. These two factors are not recognized and it seems that traders and analysts believe in the current version of Trump. OPEC's unused production capacity is not sufficient, as Iran and Venezuela have heavy crude.
The United States can not substitute that in the short or medium term. When the market returns at the end of the year, this quality problem, coupled with increased volatility in the Middle East, will not only create a nightmarish scenario for consumers, but could also push crude oil over from $ 70 to $ 85 today. barrel range. Proxy wars and sanctions could create the perfect storm for oil. A possible peak at $ 90 seems at hand.
By Cyril Widdershoven for Oilprice.com
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