Radio Sputnik discussed oil price fluctuations with Sukrit Vijayakar, founder and director of Trifecta Consultants, which offers consulting services in the area of oil markets.
Sukrit Vijayakar: This is happening because of a combination of reasons. The fact is that there appears to be adequate supply and everyone's saying we will make more supply available.
The traders' policy seems to be "be long or be wrong." That's what seems to be happening; traders are booking profits and resetting their positions.
Sputnik: Do you think that this is the result of the Khashoggi controversy?
Sukrit Vijayakar: Khashoggi controversy is what is providing added support because if the US levies sanctions on Saudi Arabia and Saudi Arabia has said that it will not react but it might react.
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You don't know what will happen once President Trump gets into action. He has been getting into action on almost everything under the sun, with little or no respect for any past agreements.
Sputnik: Is this going to play a role in the price of oil, in the oil markets, in the near future or is this going to be a very brief factor that we're going to see disappearing?
Sukrit Vijayakar: My personal sense is that it's going to be brief because if the Saudis resist, it will cut back on production, then the US will possibly counter by allowing more countries exemptions when importing [their] oil from Iran.
There's plenty of oil in the market but the question is 'which tap do I turn on?' — should I turn on the Saudi tap or should I turn on the Iranian tap. Right now I don't like either of them.
Sputnik: Can you comment on the effects of the Iranian sanctions that are kicking in in a couple of weeks? What are we going to see in the way of pricing once that significant factor does kick in?
Sukrit Vijayakar: In the absence of anything happening to Saudi Arabia, I see oil between $75 and $80 per barrel over the next couple of weeks.
The market seems to be fairly adequately supplied, as OPEC has been interesting. Once that becomes clear then markets might proceed further down towards $70 a barrel. It's entirely dependent on geopolitical stability.
If someone does something unexpected then all bets are off. The markets are very nervous for the time, which is why they're unwilling to scale down their long positions.
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They have scaled down the positions but the issue of long to short positions is still a very high level. The market is not short, it has just gone down from a very high level, but the market is still extremely long, let's not forget that.
Views and opinions expressed in this article are those of the speaker and do not necessarily reflect those of Sputnik.