Oil to hit $100?
Published on 28.09.2018 17:17

There is a lot of speculation at the moment about just how the upcoming sanctions against Iraq is going to affect the oil price with some now predicting that we could see the price reach $100 a barrel.

The introduction of sanctions against Iran is expected to remove a significant amount of oil from the market which in turn is expected to create a sever supply shortage and in turn may push the price into triple digits.

With just over a month to go before the sanctions take effect, some wild swings in the oil price are about to begin.

"I think we may well be on the verge of some very significant volatility here in Q4 2018 because, depending on the severity and the duration of the Iranian sanctions, the market simply does not have an adequate supply response for 2 million barrels of oil disappearing from the market," said  Daniel Jaeggi, president and co-founder of Mercuria Energy Trading,

"It is conceivable to see oil north of $100 a barrel," Mr Jaeggi said.

Some say however that other countries will be prepared to step in and fill the gap in the oil market, especially at current price levels and this will more than offset the removal of Iranian oil from the market and keep prices from moving too high.

They say for a large spike in the price to occur, another major disruption to supplies would have to occur such as speculation that the Trump administration is considering military action to overthrow the president of Venezuela which is also a major producer of oil.

 “We believe another supply catalyst beyond Iran would likely be needed for prices to meaningfully break to the upside,” noted analysts from Goldman Sachs

 “In particular, we continue to expect that production from other OPEC producers and Russia will offset losses out of Iran, as has been the case so far” they added.

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Andrew Masters

Analyst

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