BAKU, Azerbaijan, November 14. Amid the conflict in the Middle East, oil importing countries should be ready to use their strategic stocks if it is needed, Francis Perrin, Senior Fellow at the Policy Center for the New South (PCNS, Rabat) and at the French Institute for International and Strategic Affairs (IRIS, Paris) told Trend.
“During the first two weeks since the beginning of the new war between Israel and Hamas on 7 October, oil prices (North Sea Brent) rose by about only 10% to $91 per barrel. This increase was mostly related to the possible extension of the conflict as neither Israel nor the Gaza Strip are oil producers. In a second phase oil prices fell because the traders were less worried about extension scenarios and more focused on the world economy with not very encouraging statistics coming from China and Germany. On Monday 13 November (beginning of the afternoon) the price of Brent for the January 2024 contract was about $81.60/b. It is a level which is lower than on 6 October,” he said.
Perrin noted that for the coming weeks and months the evolution of oil prices in relationship with the Israel/Hamas war will be mostly dependent on the extension or not of this conflict: extension within Israel, greater involvement of the Hezbollah, more attacks from Shiite militias based in Syria and/or Iraq and/or from the Houthis in Yemen, strikes on Iran, harsher U.S. economic sanctions against Iran which would reduce oil exports from this country, etc.
“A lot of scenarios which, as of today, are not (not yet?) realities, hence the fall in oil prices. So far U.S. military deterrence, thanks to an increased presence in the Eastern Mediterranean, and diplomatic efforts have been partly successful. They did not solve the problem but they did prevent the extension of the conflict to other players in the Middle East, a region which holds around 50 percent of world proven oil reserves. According to the World Bank, an extension of the conflict which would generate a
disruption of world oil supplies similar to what happened with the Arab oil embargo at the end of 1973 could push oil prices to about $140-160/b. Of course, nobody can forecast oil prices but there is no doubt that an important disruption of oil supplies in the Middle East would have a strong bullish impact on the world oil market,” said the expert.
He went on to add that the key priority in order to avoid such a scenario
is thus for the international community to go on with its diplomatic efforts with the aim of preventing the extension of the war and, if possible, of ending this new war in the Middle East (clearly a very difficult task).
“OPEC and OPEC+ countries should be ready to produce more if necessary. And importing countries should be ready to use their strategic oil stocks if it is needed. The most important (and delicate) of these three priorities is the first one,” Perrin concluded.
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