Iranian Elections to Impact Oil Prices, OPEC Meeting in Focus
The oil price has jumped higher during the previous week and this should be the start of things to come in the following days, as the market absorb Hassan Rouhani presidential elections victory in Iran.
Oil has made a strong recovery since Saudi Arabia and Russia struck a deal to extend production cuts well into next year, giving a sense of optimism to the markets that the supply glut may finally be coming to an end.
Some say that the deal will be tough to organize as countries such as Libya and Nigeria are ramping up production and might not agree to any new deal.
More rigs are also coming online in the US, which will add further pressure to the price.
“They’re going to struggle,” said Michael Barry, director of research at consultants FGE in London.
“This deal has been remarkable in its implementation. As time goes on, discipline is likely to erode. Almost every country wants their production to go up.” He added.
The main focus this week is the Presidential elections results in Iran and the upcoming OPEC meeting on Thursday.
With the winning of Rouhani, it seems the the status quo will remain unchanged as he was the one who pulled the recent deals concerning oil supply and the 2015 nuclear deal.
Rouhani is in a strong position after he has reelected on May 19, and can achieve increasing Iranian production with US sanction in the shadow.
“We reiterate our call that Iran remains one of the most underappreciated political risks in the oil market. Moreover, we contend that the real risk is not of additional Iranian barrels coming online, but rather of a drop-off due to geopolitical developments,” noted Helima Croft, global head of commodity strategy at RBC Capital Markets.
The review was prepared by FIBO Group analyst Andrew Masters.