Geopolitics haunting oil again with unclear dffects - Goldman Sachs
Bloomberg reported that the oil market is grappling with intensifying geopolitical risks as uncertainty swirls over the impact of tensions surrounding nations such as Iraq, Iran and the US, according to Goldman Sachs Group Inc. While Iraq’s government is clashing with Kurdish forces in the north of the OPEC nation, raising the prospect of output disruptions in the region, both sides have an incentive to keep oil flowing due to low production costs and “high revenue” available per barrel, according to the bank. And though the U.S. has hardened its stance against Iran, there’s still “high uncertainty” over whether it’ll reimpose sanctions curbing the Middle East country’s crude supply.
Oil jumped almost 3 percent over the past two sessions as weeks of tensions following a Kurdish referendum on independence from Iraq on Sept. 25 flared into open conflict in the oil-rich Kirkuk region. Still, the rally fizzled on Tuesday, with prices trading little changed, as two fields pumping a combined 275,000 barrels a day were shut amid the violence.
Goldman analysts including Damien Courvalin wrote “The limited market response so far is therefore consistent with the high uncertainty on potential production disruptions, with larger moves only likely to occur should new disruptions actually occur.”
The tensions are intensifying at a time when the fall in Venezuelan output appears to be accelerating, and as continued political instability in Libya and Nigeria threaten supplies, according to the bank.
Goldman said that the USD 1.50-a-barrel rally in Brent crude, the benchmark for more than half the world’s oil, since Friday morning could be interpreted as reflecting expectations for an outage of 250,000 barrels a day over three months.
Given the still elevated uncertainty on oil disruptions occurring, it could also be seen as a reflection of a 30 percent probability of a six-month 500,000 barrel-a-day disruption, according to the bank.
Baghdad piggybacks its exports from Kirkuk with Kurdish shipments through a pipeline — run by the semi-autonomous Kurdistan Regional Government — that transports crude to the Mediterranean port of Ceyhan in Turkey. Iraq, the second-largest producer in the Organization of Petroleum Exporting Countries, pumps most of its 4.47 million barrels a day from fields in the south and ships it from the Persian Gulf port of Basra.
Source : Bloomberg