Increased US sanctions aimed at maximizing the export of Iranian oil, which of course, significantly reduce the oil market in the short term. However, it is unlikely to have a big impact on prices over a longer period, according to a statement by Barclays experts.
Washington demanded that the remaining buyers of Iranian oil stop buying by May 1 or they will face sanctions. The decision to completely cut off Tehran's oil revenues resulted in oil prices reaching six-month highs due to fears of a possible reduction in supply.
"This step subjects to essential risk for our current forecast of the average price of Brent oil this year, which assumes cost at the level of 70 dollars per barrel in comparison with the average index at the level of 65 dollars per barrel, but it does not, in our opinion, exert a substantial influence on the long-term price formation", they stated in Barclays.
However, even with the fact that Saudi Arabia, the United Arab Emirates and other members of the Organization of Petroleum Exporting Countries are likely to fill the supply gap created after tightening US sanctions, the bank expects Riyadh to take time to adapt to changes on the market and build a scheme that will help avoid cuts in supply. Barclays also said that the US decision increased the risk of conflict in the Middle East including the potential closure of the strategic Strait of Hormuz. According to the bank, the reaction of key consumers of Iranian oil, particularly China and India, will also be of key importance since it may be problematic for them to completely refuse from these supplies.
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