Washington, Oct 8: The crucial mid-term elections in the US are due in November, which will also see two years since the victory of Donald Trump in the presidential elections in 2016. However, with the gas prices going high (the national average in the US is heading north with $3 a gallon at a time when it should go down), will Trump and those having a big stake in the mid-term polls be worried?
According to oil strategist Julian Lee, "President Donald Trump decided to take almost 3 million barrels a day of crude oil off the market by reinstating sanctions on Iran, just as OPEC and its friends had succeeded in draining excess global inventories."
In his opinion piece for Bloomberg, Lee says it may appear that OPEC (Organization of the Petroleum Exporting Countries)-plus has come to make up for Iran's loss and Saudi Arabia's Crown Prince Mohammed Bin Salman claiming that the group has increased supply by doubling the amount which was lost with sanctions being imposed on Iran, but he said the statement is "misleading". He said the oil producers have rather struggled to make up for Iran's loss.
Citing data compiled by Bloomberg, Lee said the combined output of OPEC and Russia rose by 1.3 million barrels a day since April but there are more to the story that what catches the naked eyes. He said three things needed to be put out of the equation. First, the production by the Republic of Congo which joined the OPEC just a few months back. Secondly, the continuing decline in production from other non-OPEC members of the group, especially Mexico. And thirdly, the drop in Iran's exports of condensates - a form of light crude extracted from gas fields that has gone down considerably.
Compensating for Iran's loss still a far cry
Lee says the net effect of these factors is that the total supply of crude and condensate from the original OPEC-plus group has gone up by just around 350,000 barrels a day since April which is a long, long way less than Saudi Arabia's June claim of 1 million barrels that are required to balance the market.
The Saudis themselves are doing all they can to increase the production but the problem is that Iran's export will slide further as Trump vows to make its exports zero by November 4. This means the efforts to compensate for the loss will need to even more intense. Saudi Arabia is looking to make use of other avenues like restarting oil fields in the neutral zone it shares with Kuwait and tapping 1.3 million barrels of spare capacity but those are yet far from getting streamlined.
Meanwhile, the US is not far from the mid-term elections. Will the voters teach the incumbents a lesson?
r U.S. voters to cast their ballots in early November.