According to analysts, the country’s back and forth with North Korea, tension in the Middle East and U.S. government sanctions on Iran are all things which could hike up crude oil prices near $80 a barrel, the Houston Chronicle and a report by Citigroup shows.
Their findings reportedly speculate turbulent times in the Organization of the Petroleum Exporting Countries (OPEC) member countries, like Iraq and Libya, could mean a decline in the world’s supply of crude oil.
Given OPEC’s influence and cartel means of control on the global price and supply of oil, prices could jump to between $70-80 per barrel, according to a report Citigroup released on January 9.
“Many of these uncertainties have significant consequences for commodities,” analysts for Citigroup wrote in the report, which they titled ‘Wildcards for 2018.’
In sum, the report claims these so-called ‘Wildcards’ in many parts of the world could be the catalyst for higher oil prices.
Led by Citigroup’s Global Head of Commodities Edward Morse, their findings outline possible situations for circumstances and global country leaderships, which they say could arise in 2018, additionally ranking how likely they are to occur on a scale of 1 to 10.
According to the Chronicle, a production cut by world oil leaders helped the price to remain stable last year, but President Trump’s series of disruptive moves in world politics could threaten such stability.
The re-imposition of global sanctions on Iran, for example, stands to cut the supply of oil by around 500,000 barrels, raising the price by about $5 per barrel, the report maintains; there’s also the fragile nuclear deal and the possibility of additional sanctions to consider.
And that’s just one country:
Some fear that the talk between the U.S. and North Korea could escalate toward war.
If this happens, authoring analysts believe stockpiling of supplies, like crude oil, is likely, and could also affect the price.
Global supply disruptions in conflicted OPEC countries could also reduce the oil supply by up to 3 million barrels a day, according to Citigroup.
The report shows these wildcards could lead to two scenarios, the first of which being overproduction combined with cuts in other countries keep the market and the price of oil stable:
“The combinations of these (potential activities by OPEC, non-OPEC and shale producers) drive broad oversupply or undersupply in global oil market balances that could mean on one end that inventories start building robustly by mid-2018, with shale growth momentum even as OPEC and Russia bring back cut volumes to market; this could begin moving Brent prices back down to the $50-60 level quickly, and accelerate a return to the $40-50 range.”
The second outcome according to the study?
Supply cuts and underproduction could drive the price of oil up to $70-80 per barrel:
“On the other end, broad undersupply through underperforming shale and a firm commitment to holding the petrostate production cuts could lead to ongoing inventory declines to even tighter levels… meaning front month Brent prices could move firmly into the $70-80 range, even without supply disruptions.”
Stay tuned, Houston.