Analysts are highly divided on the future direction of the oil price which had jumped over 10 percent in the last 2 weeks before pulling back in the last 2 days as political tensions in the middle east ease.
The attack by US forces and their allies last week against Syria’s chemical weapons sites threatened to ignite an even bigger war with Syria’s allies such as Russia and Iran which sent the oil price to 3 year highs.
Now that things have calmed down and the US and UK governments are on record as saying the attack on Syria is a one-off strike, some say there are not many factors left to support the current prices of oil and a reversal is in the making.
Even the expected reintroduction of sanctions against Iran and the trouble brewing in Venezuela may not be enough to prop up the oil price.
The sanctions could destabilize the region further, but we struggle to accept a narrative that the market had been expecting big gains in Iranian output over the next several years anyway.” Noted analysts from Barclays.
“Moreover, the ongoing losses from Venezuela are also broadly accepted by most analysts. “Therefore, it is worth suggesting that in both of these countries, a dire scenario may already be priced in,” they added.
Analysts from Goldman Sachs however see things differently, and expect the re-introduction of sanctions against Iran will have a profound effect on the oil price and even if sanctions remain off the table the oil is still likely to push higher,
"The risk to Iranian supply has a very wide spectrum of possibilities. Even if President Trump doesn't sign the May 12 sanctions waiver, the end result could be just a redirection of oil flows," analysts from Goldman Sachs noted”,
“With about 200,000 barrels a day lost. However, if the nuclear deal collapses, there could be 1 million barrels a day of Iranian oil lost from the market” they added.