After Iran nuke deal
Almost 40 million barrels of oil will have to be taken off from Iran's 20 very large crude oil carriers (VLCC) and sold to different oil traders. This is the beginning of a long phase of low oil prices. No one knows how low the oil prices will fall and for how long. The nuclear agreement reached last Tuesday morning between the Group 5+1 and Iran will have to be put to test but that will not prevent oil prices from weakening further, as it is known that the volume of oil entering the super-saturated oil market is bound to increase sooner or later. We are in an open race to grasp every oil consumer. This race is bound to become more severe among the OPEC member states. Saudi Arabia is pushing for further oil production of more than 10.6 million barrels per day and perhaps aiming for a target of 11 million barrels per day to become the biggest oil producer. However, what is the reason behind this surge? Is it aimed to meet the possible increase in demand for oil in the future?
Is it aiming to become the dominant figure in the oil market and remain so and thereby have the biggest share market for years to come? Is it because the oil prices are still high and expensive to the production cost in Saudi Arabia to put more pressure on prices and keep its market share intact? We know that the oil market cannot take in more volume. We know there is no demand but the countries are still increasing their oil production. Perhaps, part of this increase is mainly due to domestic consumption during the summer time and in the holy month of Ramadan, but will it go on beyond the summer months. Will the commercial relations between the Gulf countries and Iran improve with the signing of the nuclear agreement last week? Will the trade with Dubai increase to more than $30 billion per annum?
Is there any chance for Kuwait's private sector to gain access to the big figure? Isn't it time to start normalizing our commercial activities particularly with the private sector to activate its relationship that Kuwait had enjoyed in the past? It is an opportunity for us to take advantage of, under the international umbral. It will be hard to predict the oil prices in the coming months. No one is ready yet to slow down the production rate. Probably every producer believes the level of oil prices below $60 per barrel will sustain for a long time and they can survive this period by higher production volume. It might be a good time for Kuwait to strengthen its commercial relations with Iran but we wish we can say the same about the future oil prices.
© Arab Times 2015
