EMEA News
Iran Reiterates Claim Its Oil Cannot be Replaced, But Analysts See Libya and Nigeria as Driving Prices
Presumably in full panic mode over the U.S. sanctions scheduled to hit Iran in November, the Islamic republic on Monday once again warned that its crude output loss won't be able to be replaced by other oil producing countries; but as far as RBC Capital Markets is concerned, Nigeria and Libya are the countries to pay attention to with regards to a tightening global market and the prospect of $100 per barrel prices.
Helima Croft, global head of commodity strategy at RBC Capital Markets, told CNBC that a change of leadership in Nigeria and an impending election in Libya could cause civil unrest, and that 500,000 barrels per day (bpd) could be periodically lost from the two countries as a result.
While that amount is just half a percent of daily global demand, Croft pointed out that on the back of an anticipated 1 million bpd loss of Iranian crude in coming months, this would be calamitous for the market: "If you're going to have Venezuela continuing to decline, a million barrels of Iran off the market, you can't afford to lose another big, major producer."
Barclays doesn't think oil prices will hit triple digits, but the bank agrees that If Nigeria's political opposition unseats president Muhammadu Buhari, the new leadership will have to renegotiate a deal with militants brokered by Buhari's government - and that until then, the militants might resume attacks on oil infrastructure: "Oil market participants ought to be more concerned about the possibility of disruptions in the Niger delta," wrote Michael Coen, head of energy market research for Barclays.
As for the elections scheduled in Libya in December, Hamish Kinnear, Middle East and North Africa analyst at Verisk Maplecroft, noted that "rampant insecurity" creates a high risk of serious disruptions over the next six months, and that "Increased Libyan supply has been essential in replacing declining Iranian output over the last two months."
In this context, the rhetoric coming from Iran on Monday seemed slightly more troubling than usual: Bijan Zanganeh, oil minister for the Islamic republic, told the ministry's website SHANA, "As I have repeatedly said, there is no replacement for Iranian oil in the market; Saudi Arabia and Russia's output is near their highest level ever and they have no spare capacity to pump more to replace Iran's oil."
He added that the U.S. sanctions' supposed inability to reduce Iran's exports to zero and the market's knowledge of it "has raised the prices as the average price [of crude] ... oil prices had slowed down the economic growth of most of the consumer countries, which is affecting the global economy."
It's virtually impossible to clearly determine what oil producing nations are capable and not capable of doing, and media is of no help: last week Reuters published a report that the Organization of the Petroleum Exporting Countries (OPEC) is "struggling" to add barrels to the market, when a closer analysis of the content of the story and its numbers suggested that no such struggle is taking place.
