The Middle East hangs in the balance

The Middle East hangs in the balance

/ Editor’s Letter / Monday, 23 July 2018 10:54

After some observation, it can be seen that the oil route will be more important than oil itself. The situation in the Strait of Hormuz in the last two weeks and what happened in Gibraltar with the Iranian tankers prove that today, exporting oil and gas to tiers markets has the same importance as their production, if not more.

The war in the gulf is expected but not declared yet. Now that one British tanker is seized by the Iranians, the US, Japan and many other countries got involved to secure the export of the oil and gas.

Another war is also expected between the European Union and Turkey regarding the exploration of gas in the disputed waters of Cyprus. So the situation in the Middle East area from the Red Sea to the Mediterranean and the Arabian Gulf is exacerbating, but will the war be declared or is it just a matter of tension?

Despite all of this, the prices of oil and gas almost remained the same. They vary between $55 - $65, not much of a change. Why? Because there is a lot of other oil exploration in the world now. Canada and the North Sea increased their production, shale oil extraction in the US the last two years took a surge, while other countries like South America and the Gulf of Mexico increased their production. Iranian production was new to the market but we cannot underestimate it. This is why the prices are still low.

In addition, some countries like India refused to obey to the American sanctions imposed on oil trade from Iran. One more good reason to keep the prices low, unless the war happened. In that case, no one can foresee the future of oil prices knowing that the production will stop. And if there is production, oil and gas will not reach any country in Asia and Europe.

So all we can do now is wait and see, but one thing is sure, it’s a tough time for the oil and gas industry.

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