Will the price of a barrel of oil rise to $ 200 ... or more?

It is summer. The heat is high and everyone wants to go on a summer holiday. But anyone who follows the oil market has a disturbing feeling that he may not be able to read a trivial story on the beach because oil prices are about to explode.

And who is to blame?

Iran's President Hassan Rowhani, who warned the United States on Sunday that the conflict with the Islamic Republic would be "the mother of all wars," tops the list. In addition, his comment that Iran has "guaranteed security" in the Strait of Hormuz - the relatively narrow waterway connecting the Arabian Gulf to the Indian Ocean, through which 40 per cent of the world's oil exports pass - is seen as a confirmation of Iran's threats to close the Strait rather than deny it.

Rohani's words prompted President Trump to twitter his Twitter warning, in big letters.

It was not surprising that oil prices rose initially on Monday, but as these lines were written, prices returned and fell below the level closed last Friday. The West Texas Intermediate Index - an important indicator in the oil market - remained below $ 70 a barrel.

However, the new analysis raised other concerns. The experienced oil market observer Philip K. Verlager reported a report from PKK FERLIGER Ltd. that oil prices are expected to reach $ 200 per barrel, with an impressive potential of $ 400 a barrel over the next 12 to 18 months.

Ferliger's focus was on a hidden lack of diesel fuel, rather than geopolitical threats that were exchanged between Rouhani and Trump. However, his analysis can not be easily overlooked. Refineries around the world have to reassess their fuel to produce low-sulfur diesel to meet new environmental regulations, leading to shortages that could push prices higher.

Here are some guidelines that illustrate the important points for those who find it difficult to understand how the oil markets work:

Geopolitics: It is an embellished term for wars and crises. If [the war] breaks out in the Middle East, the situation may be bad for the oil markets, although the massacres that swept Syria and Yemen in recent years have been nothing but a background noise for the market. It is likely that the market will be able to bear the drop or even lack of Iranian oil exports - but if Saudi exports are reduced, the effect will be bad.

In my opinion, all this talk about the Strait of Hormuz is just a distraction: the incoming and outgoing shipping lines are actually going through Omani territorial waters. If Iran threatens the tankers with a military strike (the obvious options are the use of floating mines or speedboats), the US Fifth Fleet, backed by US allies, will immediately and strongly respond. I think Iran may prefer tactics that are not clearly understood - such as sabotaging Saudi or Bahraini oil facilities, or encouraging Shiite Muslims in these two countries to rebel.

OPEC and OPEC Plus (OPEC-Plus): Oil-exporting countries love high prices that provide them with more money to spend in their own countries (or in southern France and similar places). We may have thought two years ago that we had abandoned the Saudi-led cartel, but Riyadh cooperated with Moscow (and thus OPEC Plus) to restrict production and to drain particularly large stocks. The result is current prices. So far, the recent talk of increased production to prevent price rises has been a sharp talk.

Economies: Growth is generally good but also increases demand for energy, leading to higher prices. At present, the world economy is growing well and hence the rise in oil prices in recent months. However, the increasing likelihood of a [tariff] tariff war between the United States and China raises a great deal of uncertainty affecting economic growth.

Technical factors: a term used by field experts to describe controls on refineries and pipelines. The barrel of crude oil [in its original state] is not usable because it requires a "distillation" process at a refinery for the production of diesel, gasoline, heavy fuel oil and a range of products that are not related to the transport sector. The demand varies according to the product, and the different fragmentation processes can not be significantly modified. One of the main concerns of America is the availability of pipelines, as it is not possible to send some of the new oil to the refineries because of the lack of adequate pipelines. No one seems to want a new pipeline near his backyard.

Any practical lull in the oil market is therefore vulnerable to potential threats - moreover, it is global and not confined to the regional level. (The slight differences in prices between the United States, Europe and Asia reflect varying types of crude oil and different distances from major markets).

It's true that markets are sophisticated enough to absorb some bad news and presidential tweets, but like most of us do not like the unknown. The current political rhetoric does not help to improve the situation. It seems as if the plot of that trivial novel we wanted to read has become reality on the ground.

https://annabaa.org/arabic/energy/16040