US trade war and sanctions policies are not helping oil markets, Russian energy minister Novak says

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Alexander Novak, Russia’s energy minister, left, speaks as Khalid Al-Falih, Saudi Arabia’s energy and industry minister, listens during a news conference following the 173rd Organization of Petroleum Exporting Countries (OPEC) meeting in Vienna, Austria, on Thursday, Nov. 30, 2017.

Novak’s comments come as oil market focus shifts away from a successful 2016 deal between OPEC and Russia (and other non-OPEC producers) to curb output in order to support prices, to current threats to the global oil supply.

Forthcoming U.S. sanctions on Iran’s oil sector, coming into effect in November, are seen as the biggest disruptive force with oil market analysts predicting that Iran’s daily production could fall by as much as 1.5 million barrels a day.

Novak’s prediction that $5-$6 could be added to the price of a barrel of oil is conservative with many oil market watchers predicting prices per barrel could rise to $90 or even $100 per barrel, particularly when sanctions against Iran take hold.

The global oil supply could also be vulnerable to economic and political turmoil, and accompanying supply disruptions, in other major oil producing countries, namely Venezuela, Iraq, Nigeria and Libya.

With sanctions looming on Iran, Saudi Arabia, OPEC’s de facto leader, and Russia have pledged to step in to the breach and pump more oil (much to the consternation of Iran, which has said no other OPEC can take over its share of oil exports) but how much spare capacity producers have, should supplies be affected beyond Iran, is uncertain.

Speaking on Tuesday at the EEF, Novak said that despite the Vienna accord helping the oil market to overcome a price slump crisis, the market is still “fragile” due to production declines in some countries, including Venezuela, Reuters reported. He added the market was still being influenced by geopolitical issues, such as uncertainty over Iran.

Oil prices rose on Wednesday as the upcoming sanctions against Iran raised expectations of tightening supply and following Novak’s comments, as well as a report of declines in U.S. crude inventories.

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