While the Kurdistan-Iraq standoff is a risk to shorter-term oil production, the increased tensions between neighboring Iran and the U.S. are a longer-term and bigger threat to global oil supplies, according to Goldman Sachs.
On Friday, U.S. President Donald Trump said he was officially withdrawing his certification of Iranian compliance with the nuclear deal, in what is being billed as part of a tougher strategy on Iran. President Trump passed the nuclear deal back to Congress to review and amend the law.
“That is why I am directing my administration to work closely with Congress and our allies to address the deal’s many serious flaws so that the Iranian regime can never threaten the world with nuclear weapons,” President Trump said.
The tougher stance from the U.S. may lead to more sanctions and to a prolonged tension between the U.S. and Iran.
“In the case of Iran, there are likely no immediate impacts on oil flows and there remains high uncertainty on potential reintroduction of U.S. secondary sanctions. If they are, we expect that several hundred thousand barrels of Iranian exports would be immediately at risk,” Goldman Sachs said in a research note on Tuesday, as quoted by CNBC.
If no other countries support the U.S. push for more sanctions, Iran’s production is unlikely to drop by 1 million bpd, according to Goldman.
Related: Chinese EV Boom Could Crash Oil Prices
Jeff Brown, president of consultancy Facts Global Energy (FGE), said at the Reuters Global Commodities Summit last week that one potential upside for oil prices would be the U.S. imposing fresh sanctions on Iran.
“While the U.S. appear to be going alone on this, we have seen in the past that U.S. sanctions alone can be very effective,” Brown said at the Reuters summit.
“U.S. sanctions could cut off a lot of Iranian oil trade finance. Last time we saw this, it cut off 1 million bpd of supplies. I don’t think it’d be that big this time round, but it would still be significant,” Brown noted.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
- Is The Aramco IPO On The Brink Of Collapse?
- Mexico Locks In $46 Per Barrel In 2018 Oil Hedge
- Major Energy Importer Bets $10 Billion On Natural Gas