'There's Big Lack of Oil Supply at the Moment, Prices Will Go Up' - Analyst

Sputnik: Crude oil prices are showing a climb in the aftermath of President Trump's announcement on the Iran nuclear deal. Do you think this will be a long-term trend or will the market stabilize soon?

Niels Christensen: Well it has been the trend for quite a while since, actually, the beginning of this year and we still have a lot of uncertainties, at least in the short-term. We do not know the total impact of the sanctions against Iran, how they're going to impact on export of oil from Iran, what other oil-exporting countries are going to do; so as long as we have these uncertainties, I think the upward pressure on oil will continue.

Sputnik: Who do you think would benefit from this price fluctuation in your view?

Niels Christensen: Well, of course, all the other oil exporting countries, I would imagine, would be very pleased to see higher oil prices, in a way also the US. The US has increased its production very much in recent months or the last year, with rising oil prices it has become much more profitable for US oil producers to increase their production; so there's a lot of countries that would benefit from these higher oil prices.

Of course, for all importing countries it would be negative for those countries, but it's not only the situation in Iran, but also the situation in Venezuela, where the oil production is also reduced quite significantly, so there is a big lack of oil supply at the moment, so that's the reason why I don't think it's going to disappear just overnight or in the very sure short-term, so I think we're going to see higher oil prices down the road.

Sputnik: Can you give us your forecast; will it be $80 or will be $90?

Niels Christensen: Saudi Arabia said earlier this year that they would be pleased to see oil prices above $80 towards $100, and they have also been indicating that they are not going to change the re-agreement amongst the OPEC countries about production cuts, that is running until the end of the year and everybody expects that deal with Russia and also other non-OPEC countries to continue into 2019, so that will also be a factor supporting the oil prices.

With this deal of oil price at the moment and the uncertainty about supply, and also moving on into the driving season in the US would expect a higher demand in consumption of oil, in the second and the third quarter; I think we're bound to reach $80 within a month or two, of course, we will see some bumps in the price down the road, and we will also see higher supply from the US. At one point maybe we will see a little fallback, and then a new consolidation in oil prices, but that might be closer to $80 rather than $70.

Sputnik: The US Treasury Department vowed to hinder Iran's sales of crude oil by imposing new sanctions on Tehran; do you think this will make any difference given that other signatories of the deal do not intend to follow US lead, or re-impose any restrictive measures on Iran?

Niels Christensen: That's a big question, it's very uncertain how big the impact will be on Iran oil exports. People are guessing right now at the moment the oil production in Iran is 3,8 million barrels a day, that was the output in March; and the export is between 2 and 2,5 million barrels a day. People are guessing that the sanctions would reduce oil exports from Iran between 200,000 up to 1 million.

Sputnik: How competitive is Iran's oil anyway? What countries could become key buyers?

Niels Christensen: Countries in the Far East, we see Japan, South Korea is the main buyer of Iranian oil and in those countries there's also already indicated that they will try to see if they can get around the sanctions from the US, and we should also remember that now that Donald Trump has introduced these sanctions, but what will his next step be, everybody's waiting for the next move, what will the US will demand for getting into new talks with allies and Iran, and again more questions marks than answers to these questions.

Sputnik: And how would the market react to Iran's decision to export oil? What long-term implications could this have?

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Niels Christensen: Well again, it depends on how long the US sanctions will be in place, and it's also a big question mark that I've mentioned — will other countries step in and increase their production? Even Saudi Arabia has been mentioned as a potential country that could increase production, but I doubt that would be the case, because if Saudi Arabia were to you increase production then it, of course, would help the situation but it will also put a question mark to the production cost deal in the OPEC countries and also non-OPEC countries; and I don't think that Saudi Arabia would like to create these uncertainties, but other countries might be able to increase their production.

The views and opinions expressed by the expert speaker do not necessarily reflect those of Sputnik.