West Texas Intermediate could rise as high as US$95 a barrel by this winter on the back of a number of factors, the leading among them the Iran sanctions, John Kilduff from Again Capital told CNBC.
According to Kilduff, founding partner of the investment company and a seasons energy trader, "The global market is tight and it's getting tighter, and the big strangle around the market right now is what's in the process of happening with Iran and the Iran sanctions. These Iranian barrels that we're going to lose, it's really going to hurt. It's really going to make a difference and tip the scale in my view to an upside surprise."
There are differing opinions about how U.S. sanctions against Iran will affect oil prices. While there seems to be general agreement that there will be a negative effect, opinions differ as to its extent. Some analysts believe that Iran could resort to secret oil shipments, for example, which will curb the effect of the sanctions, which aim to reduce the country’s exports to zero.
Furthermore, there are reports that China and India have found a way to continue buying Iranian crude despite sanctions: refiners from these two countries will simply switch to Iranian tankers insured by Tehran. This is also a headwind for prices if we are talking about Iranian sanctions as the number-one bullish factor. Related: Can We Expect An Oil Price Spike In November?
Yet Kilduff notes that Iranian crude oil exports are already falling, and this will intensify as November 4 approaches. As refiners rush to secure supply from other producers, a lot of inventories are being drained and when those inventories are depleted, prices will spike.
This is particularly true for the United States, where Kilduff noted the rising demand for gasoline despite higher prices, resulting from the strong economic growth.
“The fundamental picture is the strongest I've seen in quite some time," Kilduff said. "Everybody has got a job, everybody is driving to that job, and they're going to continue to drive to that job no matter what gasoline costs."
By Irina Slav for Oilprice.com
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