Goldman Sachs and Barclays warned investors that sanctions would not have a significant impact on oil prices in the long run, as international oil prices jumped as the United States declared an end to its exemption from Iranian crude oil.
In its latest research, Goldman Sachs said that although the U.S. waiver ended much more abruptly than expected, it would not have a significant impact on oil prices in the long run. Goldman Sachs pointed out in its research paper that Iran’s oil production would be reduced by 900,000 barrels a day, while the global available idle capacity of 2 million barrels would be increased further later this year.
It believes that oil prices will continue to fall in 2020 as the supply situation of crude oil market improves next year and there are doubts whether OPEC and non-OPEC organizations will continue to comply with the cut-off agreement after June. It maintained the basic range of Brent crude oil prices for the second quarter of 2019 at a price target of $70-75 per barrel.
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Barclays also expressed a similar view that Saudi Arabia and other major oil producers would fill the supply shortage. But it predicts that Saudi Arabia’s adjustment reaction may be slower than last year.
On Monday, April 22, the White House officially issued a statement saying Trump decided not to update Iran’s crude oil exemption policy, which expired in May, in order to reduce Iran’s crude oil exports to zero. The statement mentioned that the three major energy producers, the United States, Saudi Arabia and the United Arab Emirates, have agreed to take timely action to ensure global crude oil demand as Iran’s oil withdraws from the market.
Saudi energy minister Falkh said in a statement after the announcement of a major White House decision that Saudi Arabia would coordinate with other oil producers to ensure adequate supply of crude oil to consumers, while ensuring that the global crude oil market would not be imbalanced:
“In the next few weeks, Saudi Arabia will closely communicate with other oil producers and core oil consumers to ensure a fully balanced and stable crude oil market, for the common interests of both oil producers and consumers, and for the stability of the global economy.”
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Saudi Arabia will assess the impact of U.S. decision-making on the oil market before increasing production, while Saudi Arabia and the United Arab Emirates can rapidly increase production by 1.5 million barrels a day in a “short time”, Bloomberg quoted people familiar with the matter who asked for anonymity as saying.
The data show that Saudi Arabia, as OPEC’s largest oil producer, could produce 982,000 barrels per day in March and increase production by another 1 million barrels per day; the UAE could increase production from the current 3.45 million barrels per day to 3.5 million barrels per day. According to Bloomberg, Iran’s crude oil exports in the first two weeks of April were 1.1 million barrels a day, making up for Iran’s oil losses on behalf of Saudi Arabia and the United Arab Emirates.
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