With the reduction in oil supplies, industry experts agree that the oil market is reacting more sensitively to sudden and unexpected shocks. However, there is no unanimous agreement about exactly which risks have the most impact on prices.
Since the beginning of the year, oil prices have grown considerably, backed by a decline in OPEC + mining, as well as the escalation of Libya's military events and sanctions against Iran and Venezuela.
Brent and West Texas varieties are up 30% and 40% respectively from the start of 2019. The reason is that the balance returns to the market. Over-saturation of the market is significantly reduced, which leads to an increase in demand. However, there is a risk that stocks will be depleted faster than expected. Analysts say that several specific risky situations would lead to shocks in the oil markets.
Rebellion in Libya
"For me, the main serious risk at the moment for the oil market is the riots in Libya." - shares Stephen Brennock, an oil analyst at PVM Oil Associates.
"The oil is about to be disturbed, so the question is, rather, when this will happen, not whether General Haftar and his rebels are determined to take over Tripoli, which will create a huge risk for oil production in Libya." - adds Brenncok.
Sanctions on Iran
"Given the current balance that keeps the oil market stable, we expect it to rise to $ 70 a barrel in the second half of the year, but it will also depend on unforeseen circumstances." - says Edward Morse, a commodity analyst for Citi Group.
One such factor could be Donald Trump's decision to extend sanctions to the eight states that import oil from Iran, with a deadline until May 2nd to take that decision. Morse believes that the US will rather focus on Venezuela.
OPEC's "Black Swan"
"Expectations are that Washington will focus on sanctions on Venezuela, along with maintaining sanctions on Iran. However, the oil market is currently experiencing a strong supply shortage, and any further reduction in supplies from Libya or Iran will result in further contraction the market and rising prices. " - says Brennock.
"This could trigger a" black swan "event that would make OPEC + open the oil taps." - adds Brennock.
"What we have been able to learn over the past year is that OPEC has the flexibility to both greatly increase output and reduce it significantly over a short period of time." - says Goldman Sachs Jeff Currie.
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