Oild marketing in Mideast
The Trump administration has imposed sanctions on Iran’s petroleum sector in a bid to zero the country’s oil exports and drive Iran and even the Organization of the Petroleum Exporting Countries (OPEC) out of the oil market. The dependence of nations on oil carries one single message: Threatening Iran, which sits atop the world’s largest oil and gas reserves, will jeopardize the energy security.
The oil market is faced with special conditions due to US President Donald Trump’s tough sanctions against two major oil producers – Iran and Venezuela – and Washington’s attempts to prevent oil price hike. On one side, the Trump administration is making efforts to keep oil prices in the world markets and gasoline prices in the US from rising, while on the other side, it threatens OPEC member states on Twitter, asking them to produce more oil. Imposing sanctions on Iran and Venezuela would mean lower global supply.
Oil Geopolitics and Mideast
Fereydoun Barkeshli, President of Vienna Energy Research Group, says even though Iran’s oil exports have declined, it does not mean that Iran has been marginalized in OPEC. Iran would continue to remain as an influential OPEC member state. The US sanctions policy against Iran or every other major producer would expose these countries directly to the threat of secure energy supply.
Barkeshli said: “The oil geopolitics is back to the Middle East and the global oil market. It has changed in essence and players and their composition have changed. Increased storage by consumers constitutes a key factor that has caused changes in geopolitics and in the rank of oil market players. In other words, it has turned consumers into rivals for producers."
Oil market analysts believe that despite all events transpiring the oil market, it would continue to make the best decisions possible. The oil market is volatile and is affected by economic and non-economic factors.
Never has the oil market been as fragile as it is today. Top OPEC producers - Iran and Venezuela- are not strongly present in the market due to US sanctions. Libya, Algeria and Sudan are faced with unclear conditions due to their political unrest. Saudi Arabia has not been immune to oil market ambiguities. It claimed to have a spare capacity of 11.5 mb/d, but in practice it did not offer such figures up to February 2018.
Citing oil market analysts, Barkeshli said Saudi Arabia’s actual production capacity could not go beyond 10.5 mb/d, however, if speculation about Saudi Arabia’s production capacity is true, the country must have been doped.
Noting that the oil market is currently engaged in a dangerous political process, Barkeshli said: “It seems that the US’s shale oil is rivaling the Middle East’s conventional crude oil.”
OPEC and Tough Conditions
All factors have been combined to increase pressure on OPEC. The US has so far taken legal action against OPEC for its alleged cartel-style work. Even the establishment of the International Energy Agency (IEA) was aimed at pressuring OPEC.
OPEC has been under pressure mainly by the US, but we have seen it make better decisions when it is under pressure.
Many OPEC member states have in recent decades lost their output capacity totally or in part due to various reasons including US sanctions. Once, four OPEC member states were under sanctions: Iraq, Libya, Venezuela, Ecuador and now Iran.
He said that natural disasters like flood, quake, volcano eruption and national unrest have caused a halt in oil production in some nations, but Iran has maintained its presence within OPEC.