Members of oil cartel OPEC are believed to be agitating to lift their production to hastily fill the gap caused by America’s heavy sanctions on Iran, and stop a potential runaway crude price.
The oil price rose this week after the Trump government said it would place heavy sanctions on Iran and stop China, India and six other countries importing Iranian oil.
The US imposed sanctions on Iranian oil in 2018 but had granted eight countries an exemption for limited purchases. The exemptions will now expire on May 2 and cut about 1.3 million barrels of oil from global supply.
CommSec analyst Ryan Felsman said the decision had “wrong-footed” the Organisation of Petroleum Exporting Countries (OPEC) and Russia, which may now boost oil output to fill the demand shortfall.
“The Saudis may lift production more than the gap that has arisen through the sanctions on Iran,” Mr Felsman said.
“There have been quite a few [OPEC] partners agitating to lift production again and Russia has been less than enthused about maintaining supply cuts.
“Our view is that the oil price will stabilise or even weaken as a result. This could potentially be a game-changer.”
In 2017, OPEC and Russia agreed to curb production rates to lift an oil price languishing around $US50 a barrel.
However, in 2018, the group lifted production after US President Donald Trump announced the Iranian oil sanctions and to stop an oil price spike that was forecast to potentially reach up to $US100 a barrel.
Read the article by Cole Latimer in The Sydney Morning Herald.