Oil to rise as Iran sanctions outweigh demand risks from trade wars

Traders are worried oil storage tanks are about to empty on reduced Iranian supplies. (Reuters)
Updated 28 September 2018

Oil to rise as Iran sanctions outweigh demand risks from trade wars

  • Highest forecast for 2018, 2019 Brent prices this year
  • Shale growth could be limited by infrastructure problems

LONDON: Oil prices are likely to climb continuously into next year, as concerns over drops in supply from the likes of Iran and Venezuela outweigh any worry that global trade disputes could undermine demand, a Reuters poll showed on Friday.
A survey of 50 economists and analysts forecast Brent crude to average $73.48 a barrel in 2018, up from the $72.71 forecast in August and the $72.68 average so far this year. Brent was forecast to average $73.75 in 2019.
This is the highest projection for the benchmark for both 2018 and 2019 in the polls this year.
“Concerns over global trade disputes have not yet really affected economic growth, but the sanctions on Iran already have had an impact on Iranian exports and output,” said Frank Schallenberger, head of commodity research at LBBW.
“If an export destination like South Korea is not willing to buy Iranian oil anymore, there is a high probability that output from Iran could drop some 500,000-1 million bpd. This is really bad news for the supply side — and especially also for the consumers — as prices could go up even further.”
Iranian exports of crude and condensates have declined by 0.8 million barrels a day (mbd) from April to September, according to the Institute of International Finance, ahead of the Nov. 4 US sanctions on the third largest producer in OPEC.
Brent prices have risen more than 20 percent since the beginning of April.
Analysts expect a reduction of anywhere between 500,000 and 1.5 million bpd in Iranian supply due to the sanctions, with most expecting Saudi Arabia to take the lead in filling any supply gaps.
“The best is yet to come with a fourth-quarter of $80-plus per barrel driven by still strong oil demand growth, expectation of a significant drop in Iranian exports to 1 mbd by year-end and an only limited willingness by OPEC to ramp-up output to exhaust spare capacity,” said Jan Edelmann, commodities analyst at HSH Nordbank.
However, an escalating trade dispute between the US and China, the world’s largest consumer of commodities, could affect demand growth, especially next year, analysts said.
“Uncertainty about possible effects of a trade war between the US and China could dampen some of the upside risks triggered by the supply issues,” said Hans van Cleef, senior energy economist at ABN Amro.
Meanwhile, US crude futures were forecast to average $67.29 a barrel in 2018, compared with the $67.13 consensus last month and an average of $66.76 until now.
A majority of participants saw growth in US shale oil output slowing over the remainder of 2018 and into next year due to infrastructure problems.


Emirates Skycargo deploys capacity to supply food, medicines in UAE

Updated 51 min 15 sec ago

Emirates Skycargo deploys capacity to supply food, medicines in UAE

  • The UAE imports 90 percent of its food
  • The cargo organization said it transported between mid-January and mid-March more than 225,000 tons of cargo

DUBAI: Emirates Skycargo said on Wednesday that it deploys capacity to supply and replenish food and medicines in the UAE, as rulers role out strategies to sustain the country amid the coronavirus pandemic, Reuters news agency reported.

The national cargo organization said it transported between mid-January and mid-March more than 225,000 tons of cargo in total out of which 55,000 tons were food items including fruits, vegetables, meat and seafood, and more than 13,000 tons were pharmaceutical. 

Since the UAE imports 90 percent of its food, food security is a top priority. The annual food security costs of the country is $3.53 billion annually.

Earlier this week the UAE announced a strategic food security law that ensures adequate and uninterrupted food supplies through wholesalers and retailers across the UAE at all times, Khaleej Times reported. 

The law seeks to regulate the strategic stock of food commodities in the country in the event of crises, emergencies and disasters and offers incentives and facilities to registered providers and merchants.