crude, oil
An employee looks out across oil pipes used for landing and unloading crude and refined oil at the North Pier Terminal, operated by Saudi Aramco, in Ras Tanura, Saudi Arabia. Image Credit: Bloomberg

Abu Dhabi: Uncertainty is expected in oil markets in the next three months due to ample supplies as well as Iran’s ability to continue to export despite sanctions by the US administration.

“We see great uncertainty in the next three months with Iranian sanctions being the biggest oil price variable currently and we do not see an imminent drop in Iranian exports,” Jaafar Al Taie, managing director of Manaar Energy group, told Gulf News.

“We see ample supplies and we see Saudi Arabia’s ability to step in and compensate for any loss of Iranian barrels. So we do not see strong evidence yet of any dramatic oil price impact. However, it’s a fluid situation and we have to keep watching to see the real effect of US sanctions on Iran.”

Brent, the global benchmark is currently trending at about $71 per barrel with West Texas Intermediate at about $62 per barrel. Both oil benchmarks are trending lower despite ending of Iran sanction waivers by the US administration earlier this month.

Iran sanctions

He also said Iran sanctions is having less of an impact on oil markets than previously thought due to rise in the production from the US as well as uncertainty surrounding the effectiveness of sanctions by the US administration.

“I think the Iran sanctions is having less of an effect than we would have expected for two reasons. First, we don’t really know the effect of sanctions as it is still not clear whether these sanctions are effective or Iran is going to find a way out of it. There is also a divided view on sanctions between Americans, Europeans and obviously Chinese, all have different views on how to approach Iran,” he added.

“The second reason is market-driven. We still have quite robust supplies coming out of the US, there are still some cracks between Russia and Saudi Arabia and there is a possibility that Russia could increase supplies and there are still good supplies from Iraq that could absorb any loss of Iranian oil in the short term.”

However, in the longer term towards 2020, prices could jump by $5 per barrel if the sanctions persist and Iran goes to zero exports, he added.

Earlier this month, US administration decided to end Iran sanction waivers granted to eight countries that import oil from the Islamic Republic including China, India, South Korea and Japan, among others following reimposition of restrictions on the country last year for its nuclear related activities.