Iran and Saudi Arabia have or are right now kicking out all diplomats from their embassies of each other. So, the likelihood of Blockades of Oil tankers by Saudi Arabia of Iran or Iran of Saudi Arabia are quite likely in the next couple of months the way this is presently going. Because diplomatic relations between Saudi Arabia and Iran are over for now at least. Does this mean a real war between the two of them?
Beyond blockading each others oil tankes I don't think real war in Iran or Saudi Arabia is likely beyond Iran shipping arms to the Houthis in Yemen or Saudi Arabia hiring mercenaries against Assad in Syria or to Iraq or to fight in Yemen.
Oil prices
surged during the start of 2016 trading as relations between top crude
producers Saudi Arabia and Iran deteriorated, raising concerns about
potential supply disruptions, though weak Asian manufacturing data kept a
lid on bullish expectations. Saudi Arabia, the world's biggest oil
exporter, cut diplomatic ties with Iran on Sunday in response to the
storming of its embassy in Tehran. Oil traders said the crisis between
Saudi Arabia, also the world's second-largest oil producer, and Iran,
which holds some of the largest proven oil reserves, was pushing up
prices.
SINGAPORE (Reuters) - Oil prices
surged during the start of 2016 trading as relations between top crude
producers Saudi Arabia and Iran deteriorated, raising concerns about
potential supply disruptions, though weak Asian manufacturing data kept a
lid on bullish expectations.
Saudi Arabia, the
world's biggest oil exporter, cut diplomatic ties with Iran on Sunday in
response to the storming of its embassy in Tehran. The diplomatic row
between the two major oil producers escalated following Riyadh's
execution of a prominent Shi'ite cleric on Saturday.
Global
oil benchmark Brent climbed more than a dollar to a high of $38.50 per
barrel on Monday, before easing back to $38.10 at 0350 GMT, still up
over 2 percent. U.S. crude's West Texas Intermediate (WTI) futures were
up 77 cents, or 2.08 percent, at $37.81 a barrel.
Oil
traders said the crisis between Saudi Arabia, also the world's
second-largest oil producer, and Iran, which holds some of the largest
proven oil reserves, was pushing up prices. The clash between the two
Middle Eastern rivals also comes as Iran hopes to ramp up oil exports
following the expected removal of sanctions against it after reaching a
deal over its alleged nuclear weapons development programme.
"With
increased geopolitical tensions between Saudi Arabia and Iran, the
market has put a premium on prices just when markets opened (in 2016),"
brokerage Phillip Futures said on Monday.
Revolutionary,
mainly Shi'ite Muslim Iran and Saudi Arabia's conservative Sunni Muslim
monarchy have clashed for years in the Middle East in political
conflicts that have followed along sectarian lines. Most recently, Saudi
Arabia has led its military against Iranian-back Houthi Shi'ite
militias in Yemen.
Despite Monday's jump, oil prices
are down by two-thirds since mid-2014 on ballooning oversupply as
producers including the Organization of the Petroleum Exporting
Countries (OPEC), Russia and the United States pump between 0.5 million
and 2 million barrels of oil every day in excess of demand.
"OPEC,
Russia and the U.S. beat our initial supply expectations, adding to an
existing inventory headwind. For 2016 we think of it as the market
rebalancing year, but only from 2H (the second half of 2016)," Alliance
Bernstein said.
"Next
year will be the year of under supply which means we should see at
least an eighteen month bull market from the middle of this year," it
added.
Alliance Bernstein said it expected average
Brent prices to fall from $53 per barrel last year to $50 in 2016 but to
recover to $70 a barrel in 2017 and to rise to $80 per barrel in 2018.
For the moment, oil markets remain dominated by oversupply.
Iran
plans to raise output by half a million to 1 million barrels per day
(bpd) post sanctions, although Iranian officials said they did not plan
to flood the market with its crude if there was no demand for it.
Iran's oil exports have fallen to around 1 million bpd, down from a peak pre-sanctions peak of almost 3 million bpd in 2011.
In Russia oil output hit a post-Soviet high in 2015, averaging 10.73 million bpd.
On
the demand side, concerns over Asia's slowing economies weighed as
China's factory activity shrank for a 10th straight month in December as
surveys across Asia showed industry struggling with slack demand.
Oil
prices surged during the start of 2016 trading as relations between top
crude producers Saudi Arabia and Iran deteriorated, raising concerns
about potential supply disruptions, though weak Asian manufacturing data
kept a lid on bullish expectations. Saudi Arabia, the world's biggest
oil exporter, cut diplomatic ties with Iran on Sunday in response to the
storming of its embassy in Tehran. Oil traders said the crisis between
Saudi Arabia, also the world's second-largest oil producer, and Iran,
which holds some of the largest proven oil reserves, was pushing up
prices.
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