Oil prices (photo vecteezy)
The Chief Economist of Leumi Bank, Gil Befman, estimates today that even if an agreement is signed between the West and Iran, it will not affect the expected shortage of oil in Europe this coming winter. Signing an agreement with Iran will indeed affect the supply of oil, but its return to the oil market at full output, or close to it, will take several months.
“The OPEC group estimates that the fears in the markets about the slowdown in economic activity in China, which may lead to a decrease in demand for oil, are greater than the expected actual slowdown. In the group’s assessment, there is a risk of a further reduction in the supply of oil for some producers, due to the erosion of their production capacity reserves.
More in-
“The group estimates that, contrary to the preliminary signs in the market, growth in China will continue at a high rate, due to the continued opening of the economy after the closures that occurred in the months of March-May. In our estimation, if the drop in prices continues, then the OPEC Plus group will reduce the production quotas and allow an increase only in accordance with the agreements that were So far and no further than that.
“The rapprochement between the European Union and Iran in the nuclear talks increases the chances of signing a new agreement, which depends on the approval of the USA, which may increase the supply of oil in the market. This, since the signing of an agreement is expected to remove from Iran the sanctions imposed on its energy sector, which will allow it to legally export oil and increase the global supply.
“The process of returning Iranian oil to the market is expected to take several months, during which Iran will add hundreds of thousands of barrels of crude oil to the market per day. In our estimation, the signing of the nuclear agreement is not expected to be immediate and the negotiations will continue with the aim of bridging the existing gaps, so the talks are not expected to affect the market In the second half of 2022, and in particular, they are not expected to have an impact on the oil shortage, which is expected to worsen, in Europe at the beginning of the winter season,” says Befman.
More in-
As for Russia’s output, Befman says that “Russia’s oil output has recovered in the last three months, after it contracted with the invasion of Ukraine in February. Russia has taken several steps in an attempt to find customers for its oil, the main of which was a significant lowering of the price below the market price, especially for customers in Asia who purchased the oil that was supplied to the Western countries until the imposition of sanctions on Russia following the invasion.
“The supply of oil to the European Union did not stop during these months and it also supported the Russian oil sector. However, in the coming months the European Union is expected to start enforcing a ban on oil imports from Russia, which will force it to reduce a part of the oil production that will not find new customers, a step that will exacerbate the Damage to Russian economic activity.
“Russia may turn to poorer Asian countries in order to sell oil to them and allow the continuation of production activity in the economy. Myanmar is expected to join the existing customers of Russian oil and start importing crude oil from it, against the background of the growing shortage of oil. Bangladesh may also start importing oil from Russia to deal with The energy shortage, but the process requires political approval and may take some time. The population of Bangladesh and Myanmar is over 200 million people, so the supply of oil to them can support the demand for Russian oil. However, these countries are very poor and may have difficulty financing large oil purchases At the current prices, which may result in Russia selling them the oil at a greater discount,” Befman concludes.
Comments to the article(0):
Your response has been received and will be published subject to system policy.
Thanks.
for a new comment
Your response was not sent due to a communication problem, please try again.
Return to comment