Geopolitical conflict does not raise oil price permanently

Tensions in the Persian Gulf are causing turbulence on the crude oil market. In the Strait of Hormus, Iran put an oil tanker sailing under the British flag on the chain. About one third of the crude oil transported by sea crosses the strait on the southern coast of Iran. The events are therefore being watched very closely. However, there is no sustained increase in the price of crude oil. One reason for this is that no further escalation is to be expected. Iran will only span the arc of conflict so far that a military conflict can be avoided. The USA is predominantly relying on the sanctions policy it has adopted against Iran and also wants to avoid a military escalation. The fixing of the tanker is also seen by many market participants as a return carriage on the Iranian tanker moored off Gibraltar. Tehran, meanwhile, is sending more conciliatory tones and offering an exchange of both oil tankers. At least so far, the geopolitical conflict has not been sufficient to stabilize the price of crude oil at a higher level in the long term.

Although Opec+ has extended its cutback plan by nine months, the crude oil market is gradually becoming more and more aware that the shortage will be noticeably reduced with a view to 2020. Production in the USA continues to rise. Brazil, Canada and Norway will also increase their production. This reduces Opec’s influence on the oil price. The cartel itself announced on 11 July that the demand for Opec crude oil (‚Call on Opec‘) would fall dramatically next year.

Demand growth is also continuing to weaken due to the ongoing international trade disputes. As we do not expect a quick and satisfactory solution to the trade dispute, the outlook for consumption will continue to deteriorate. Although demand is likely to continue to rise slightly in 2020, it will not be as rapid as supply. The situation on the crude oil market has thus eased noticeably. Nevertheless, the situation in the Persian Gulf can continue to escalate significantly. An open military conflict would have the potential to massively increase the price, at least in the short term. Based on the political arguments outlined above, however, we do not expect this and confirm our Brent oil forecast of USD 55 per barrel for the next twelve months.

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