An Indian energy expert says global oil prices could hit USD 200 per barrel in case of a possible Israeli attack on Iran.
An Indian energy expert says global oil prices could hit USD 200 per barrel in case of a possible Israeli attack on Iran over the latter country’s nuclear energy program.
In an interview with the NDTV Profit network, Amrita Sen, a commodity strategist at Barclays Capital, noted that the price hike would have a powerful negative impact on Europe’s ailing economies which are already suffering from a euro weak against the dollar.
The expert added that there are other factors at work which may further worsen the negative effects of such an oil shock.
She stated that some smaller oil-producing countries like Yemen, Sudan and Nigeria, have already lost a total of a million barrels per day of their output while the energy demand in big Asian economies like India and China is rapidly soaring.
As a result of a combination of these factors, Sen said, “oil inventories have been drawing down despite the output being above 10 million barrels per day.”
Asked whether Saudi Arabia can compensate for the absence of Iran's oil from global markets, the expert stated that Riyadh’s surplus capacity was not high enough to serve such a purpose.
“The replacement [for Iran oil] has to come from Saudi Arabia and there is the problem. We reckon overall global spare capacity is around 1.6 to 1.7 million barrels per day (mbpd), but that’s clearly not enough to offset 2.3 mbpd exports that Iran gives to the world,” Sen said.
She noted that in addition to the situation in Iran, the crises in two other major oil producers, namely Iraq and Nigeria, have reduced the global surplus oil production capacity to below one million barrels a day.
“It is not just Iran; there is Iraq, there is Nigeria. Anytime you go down to spare capacity, which is less than one mbpd, automatically the prices will rise. You should have at least a five-percent buffer. Inventories have been low as well. So there is not enough buffer in the oil market at present,” she added.
After the European Union imposed new embargoes on oil imports from Iran, Tehran responded by announcing on February 15 that it was cutting oil exports to six EU countries.
Following the announcement, global oil prices reached their highest levels in nine months with Brent crude for delivery in April hitting USD 124.31 per barrel.
Meanwhile, the world's largest oil trader, Vitol, has also warned that crude prices could spike to above USD 150 per barrel if tensions with Iran escalate further.
SS/HJL/IS
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