Oil Prices Could Hike Up to $100 Per Barrel Within the Upcoming 3 Months
Major oil trading houses fear the return of $100 crude oil in the upcoming three months. This hike might take place for the first time since the year 2014 as the market braces for the loss of Iranian supplies because of the U.S. penalty.
Daniel Jaeggi, the president of the commodity merchant Mercuria Energy Trading, said that because of the U.S. sanctions against Iran, millions of barrels per day (bpd) of crude oil could be taken out of the market by the end of the fourth quarter this year, making oil prices spike up to $100 a barrel.
Such a rise in oil prices would make it the first time since the summer of 2014 that oil would return to the $100-a-barrel price level.
“We’re on the verge of some significant volatility in Q4 2018 because depending on the severity and duration of the Iranian sanctions, the market simply does not have an adequate supply response for a 2 million barrel a day disappearance of oil from the markets,” Jaeggi said.
Washington plans to target the country’s oil exports from the 4th of November and has already made financial penalties against Iran. This has managed to put pressure on other countries as well, in efforts to cut them off from Iranian crude oil imports.
Ben Luckock, who is the co-head of oil trading at fellow merchant Trafigura also said that crude oil prices could hike up to $90 per barrel by Christmas and $100 by the start of New Year as the markets tighten.
Earlier on Monday, Oil prices rose by almost 2 percent as the U.S. sanctions restricted Iranian crude exports, which helped tighten the total global supply. Iranian crude oil is currently trading at $72.02, roughly up by 1.72%.
However, oil prices rising is nothing new in the face of the global market. In fact, it has been rising since early 2017, when the Organisation of the Petroleum Exporting Countries (OPEC), started halting the output to lift crude prices, together with other suppliers including Russia.
Unplanned disruptions have further tightened the market, because of the route from Venezuela to Libya and Nigeria, just when the global demand approached 100 million bpd for the first time.
To counter the recent falling supply from Iran, OPEC and other oil producers are considering to raise the output of crude oil by 500,000 bpd.
It could cause Washington to take extraordinary steps, including the use of the Strategic Petroleum Reserve, to cool down the crude oil and other fuel prices ahead of the U.S. mid-term elections.