Oil markets torn between two competing forces – NBF

Angelo Katsoras, analyst at National Bank Financial, suggests that the potential resumption of negotiations between Iran and the United States would depress oil prices in the short term because, unlike Venezuela, which will take years to recover from its lost production levels, Iran could significantly increase its oil exports in a relatively short period of time.

Key Quotes

“Signs that the global economy is continuing to slowdown owing to, among other thing, worries over trade tensions between China and the United States could place further downward pressure on oil prices. These fears are heightened by the International Energy Agency reporting that supply exceeded demand by about 0.9 million barrels per day (bpd) in the first six months of this year.”

“The IEA also lowered its demand-growth forecast for 2019 to 1.1 million barrels a day, down from previous projections of 1.2 million barrels in June and 1.5 million barrels late last year. However, should talks be unsuccessful or even fail to materialize, geopolitics could once again have an outsized impact on oil prices. Such a development would only aggravate a situation already marked by ongoing sanctions against Venezuela’s and Iran’s oil sectors, Mexico’s declining oil production, and the continued agreement by OPEC and other countries (led by Saudi Arabia and Russia) to cut oil production.”

“Finally, were a trade agreement to be reached between China and the United States, this would boost global economic growth prospects and have a bullish effect on oil prices.”