Will Saudi Arabia be able to replace Iranian oil?

By A/S Global Risk Management.

Michael Poulson, Senior Oil Risk Manager at Global Risk Management. Image credit: A/S Global Risk Management

Updated on 18 Oct 2018 06:07 GMT

After a huge inventory build of 6.5 mio. crude barrels from EIA yesterday, prices dropped to below $79.50 before slowly starting to recover. The $80 threshold was once again broken through and Brent crude did not retrace above $80 as fast as earlier. This indicates a possible loss of belief in the market after the news of Saudi Arabia being able to replace the missing Iranian oil. However, will Saudi Arabia really be able to offset possible future missing barrels? It is considered very possible that more barrels will be taken off the market when the U.S. sanctions on Iran really kick in. Some analysts believe that these are replaceable due to the unutilized production and spare capacity in primarily Saudi Arabia and Russia. This alleged production and spare capacity has, however, never really been utilized as Saudi Arabia is approaching record production and Russia is already producing at record-breaking levels. As of now, it seems the market believes that the Iranian oil is replaceable. The ongoing dispute between the US and Saudi Arabia is yet to be resolved as the columnist is still missing - last seen at the Saudi embassy in Turkey.

A/S Global Risk Management is a provider of customised hedging solutions for the management of price risk on fuel expenses. The company has offices in Denmark and Singapore. For further details about its risk management products and services, please call +45 88 38 00 00 or email hedging@global-riskmanagement.com.