Arthur J. Villasanta – Fourth Estate Contributor
Washington, DC, United States (4E) – Nothing is going to stop oil from hitting $100 a barrel by the end of the year — or earlier — because of the Trump administration’s renewed economic sanctions on Iran that come into effect on Nov. 4
Oil is now above $85 per barrel for the first time since 2014. Analysts affirm that OPEC kingpin Saudi Arabia will be unable to prevent a supply shock in the energy market when oil hits $100 a barrel. Oil peaked at $147.27 on July 11, 2008. On December 23, 2008, at the height of the Great Recession, WTI crude oil spot price fell to US$30.28 a barrel.
It’s kept rebounding since, but the largest factor in the approach to $100 a barrel is Trump’s desire to cripple Iran by halting its oil exports. The Trump administration is also asking buyers of Iranian oil to slash imports to zero to force Tehran to negotiate a new nuclear agreement to replace the Joint Comprehensive Plan of Action (JCPOA) that it trashed.
Iran produces two million barrels of oil a day, and OPEC no longer has the capacity to make up this shortfall. Saudi Arabia, however, has said it can increase output by as much as 550,000 additional barrels per day over the next couple of months.
This scant boost will be unable to fully offset global supply disruptions over the coming months. This situation essentially leaves Saudi Arabia, the world’s only swing producer, powerless to prevent a supply shock and subsequent price spike to $100 in the final quarter of this year.
In a desperate bid to avoid being blamed for $100 oil, Trump tried bullying OPEC producers to boost production levels to prevent further price hikes ahead of the U.S. mid-term elections in early November.
“Nobody wants to get caught short, full in the knowledge that more Iranian barrels are poised to be removed from the market,” said a research note from PVM Oil Associates, a research and investment firm based in Singapore.
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