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After an increase of more than 30% since the beginning of the year, oil prices could rise further in the coming weeks, as a combination of bullish factors linked to supply could push prices to the up from current levels.
In the coming weeks, several critical geopolitical events could signal the upward trend in oil prices in the coming months. These events, combined with the tightening of the global oil market, could make prices vulnerable to any sudden supply disruption, in addition to the production cuts made by OPEC and its non-OPEC allies led by the United States. Russia.
Experts who recently spoke to CNBC acknowledge that the oil market could be subject to a major supply-side disruption, although they differ as to who is the biggest disrupter.
The top three candidates are Iran, Venezuela and Libya. The three OPEC producers were exempted from the production cuts in the cartel that began in January and are expected to last until at least June. And all three have shown so far this year that there are good reasons to be exempted – their respective production is declining or unstable, and may be subject to further disruption during the course of the year. weeks and months to come.
According to Stephen Brennock, oil analyst at PVM Oil Associates, Libya will pose the greatest geopolitical risk for the oil markets.
General Khalifa Haftar, an eastern strongman, ordered the Libyan National Army (LNA) earlier this month to march on the capital Tripoli. The self-proclaimed army clashed with UN-backed government troops in a new clash that could escalate and threaten to disrupt Libya's oil production and exports again.
"Oil production in the country has not been disturbed yet, but I guess it's about whether. General Haftar and his Libyan forces from the east are determined to seize Tripoli, resulting in the inevitable risk of supply disruption, "Brennock told CNBC in a courier. electronic.
Cailin Birch, a world economist at The Economist Intelligence Unit (EIU), thinks Iran and the United States are imposing sanctions on his oil industry, which is the main problem of supply. The unpredictability of the US administration's policy could lead the US to remove exemptions granted to Iranian oil customers by early May, Birch told CNBC.
However, many other analysts believe that the United States – despite its persistent discussions of "maximum pressure" on Tehran and "zero exports" from Iran – will be more lenient toward Iran's major oil buyers. The reason – the fear of driving oil prices (and gasoline) too high.
Some analysts say that with tougher sanctions against Venezuela and the regime of Nicolas Maduro, the United States could still mitigate on Iranian customers, because these two ruptures of Combined supply, coupled with a possible breakdown in Libya, could overly tighten the market and lead to oil price overruns.
Related: Oil could drop to $ 40 if OPEC abandons its market
"This could turn out to be a black swan event, as it would force the OPEC alliance to reopen the oil terminals," Brennock told CNBC.
Jeff Currie, head of commodity research at Goldman Sachs, told CNBC earlier this month that economic and monetary policy changes in a large economy, such as China or the United States, would be even more likely.
Goldman Sachs is one of the investment banks that do not see oil prices as high as $ 80 per barrel as they did in the third quarter of last year, as the price rises are only modest.
Citigroup, however, sees higher prices than oil prices.
Merrill Lynch, of the Bank of America, believes that "the risk of a surge in the price of crude oil in Brent is significantly higher than suggested by the options markets," because the new regulations of the International Maritime Organization (IMO) aimed at limiting the sulfur content in ships' fuel can only disrupt the oil and refining markets by the end of this year.
"The nearly 40% rise in crude oil from the December low allowed WTI and Brent to recover half of the losses seen between October and December. As global demand growth continues despite the prospect of weaker global growth, the market has instead been forced to focus on a near-perfect storm of price-oriented supply information. " Ole Hansen, head of the quarterly strategy of the bank for the second quarter of 2019.
"As Opep + continues to reduce production and the United States imposes a decline in Iranian and Venezuelan exports, only a major change in the demand outlook will change the current positive sentiment," he said. expert from Saxo Bank in early April.
Saudi Arabia and several other OPEC producers need a price of oil above $ 80 for budgetary reasons and will likely not be satisfied with just $ 70 a barrel of Brent, a said Hansen, adding:
"On this basis, we expect the supply to be sustained in the coming months, which should support a potential expansion to $ 75 / b before running out of steam in the face of renewed concerns about the negative impact on the market. global growth. "
By Tsvetana Paraskova for Oilprice.com
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