Iran sanctions, Venezuela collapse likely to push oil to $100/b: Total CEO

Brent Crude

Turning from speculative conditions to the fundamentals of oil production, it is far from clear that sanctions will reduce Iran's exports sufficiently to affect the global balance of supply and demand. It stood at $79.39 as of 8:20 pm Nigerian time.

Even at $80 per barrel, the costs of oil are huge, with Asia's consumption costing $1 trillion a year, twice as much as during the price lull of 2015/2016.

The sanctions against Iran reinstated by US President Donald Trump raise two all-important questions that have no convincing answers.

"When we backed out of the Iran Nuclear Deal that took about 500 to 800 barrels a day, roughly, off the market initially, and so that created about a $5 lift on the Brent Oil Crude Prices, about $2 to $3 lift on USA prices in the last five days on that", said Eugene Graner, Heartland Investment Services President.

Global oil supplies could be hit by the decision by the USA to pull out of the Iran nuclear deal, and also by falling production in crisis-hit Venezuela, the IEA said on Wednesday.

On Wednesday, France's Total warned it might abandon a multi-billion-dollar gas project in Iran if it could not secure a waiver from U.S. sanctions, casting further doubt on European-led efforts to salvage the nuclear deal.

As an aside, analysts at Barclays Research bumped up their forecast for the price of oil in 2020 and beyond from $60 a barrel to $65.

More so, member states of the Organisation of Petroleum Exporting Countries (OPEC) have overtime implemented a resolution that ensured reduced crude output, a move that ultimately reduced global oil inventories and spiked prices.

"We are back to the situation where we were before the 2016 agreement and in the meantime Iran has grown its exports by 1 million barrels a day", Pouyanne said.

But experts fear the United States might stop Iranian banks' access to the global transaction network SWIFT thereby curbing all transactions in foreign currencies.

"While the economic environment will continue to support oil demand. support from harsh weather conditions will vanish and the recent jump in oil prices will take its toll", it said.

"Clearly the recent rise in oil prices is going to pose a problem for some central banks due to the temporary impact it will have on the inflation data, especially when you consider that in the past year, Brent crude prices are up more than 50 percent", Craig Erlam, senior market analyst at Oanda trading group, told AFP.

U.S. crude output has soared 27 per cent in the last two years to a record 10.72 million barrels per day, putting it within reach of top producer Russia's 11 million bpd.

Graner says we may see the market drop again towards the end of summer.

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