Sputnik talked about the oil market and Donald Trump’s call for countries to stop buying Iranian oil from November with Dr. Mamdouh Salameh, an international oil economist and a visiting professor of energy economics at ESCP Europe business school, London.
Sputnik: In your view how justified are the concerns of oversupply and what effect will that have on the oil market in the near future?
Dr. Mamdouh Salameh: For the time being there is, what I call, a concerted effort by many parties around the world to keep oil prices repressed. However, there is one fact which I have been always saying, is that the global oil market has not rebalanced completely till now. There’s a bit of oil glut, a small amount, which could take care of outages in Venezuela, in Norway, in Nigeria and in Libya, and that, to some extent, has been causing the prices to remain stagnant to some extent. The oil market will improve shortly and there is one important point — what Saudi Arabia is saying, that it has added around 400,000 barrels a day to the global oil market might not be true. You realize that in summer, particularly in July-August, Saudi domestic oil demand goes up very significantly and that explains, to a major extent, the announcement by Saudi Arabia that they’re adding that amount to the global oil market.
Sputnik: What losses can other oil producers endure following the November deadline to stop buying Iranian oil imposed by the United States?
Dr. Mamdouh Salameh: It will have no effect whatsoever. In my research and my discussions and at my lectures I have been saying that the United States sanctions on Iran will not have any impact on Iran that they will fail. They will not cause Iran the loss of a single barrel of oil, and we know why. One, because the European Union, to start with, is not going to comply with the sanctions against Iran, and second, China has promised to increase its oil imports from Iran if there is a reduction in Iran’s exports. Furthermore, Russia has a barter trade, like Turkey and India, also with Iran, so all of this and, of course, the most important part is the petroyuan, which is magnifying the effectiveness of US sanctions and at the same time providing another vehicle for the oil producing countries of the world to bypass the petrodollar completely.
Sputnik: What impact has this had on the American crude market then?
Sputnik: How likely are other countries to follow the US President's calls to stop Iranian oil then, and what’s your take on this? How will these restrictions affect the Iranian economy?
Dr. Mamdouh Salameh: It will not work. He (Trump) has been urging many countries, especially his allies like Japan, South Korea and India, and many others, to stop buying Iranian oil. Iranian oil exports go to few countries around the world; the top one is China, the second one is India, then Turkey, South Korea and Japan. Even Japan and South Korea are not going to stop completely their oil imports from Iran, they might try to secure a waiver, which the United States might give to South Korea, Taiwan and Japan.
As for Turkey, it said it will not stop, it looks after its own interests and it will continue to buy Iranian oil. As for India, they go hot and cold, they say at one point that Indian refineries will stop importing Iranian oil — that is not true, India does not recognize any sanctions except United Nations sanctions, and with the good deal they’re getting from Iran, they’re going to continue buying Iranian oil because the value of their imports reached last month more than 700,000 barrels, and they’re getting very good prices for that, so they’re not going to stop buying Iranian oil. In a nutshell, the sanctions will fail and even America's allies will continue to buy oil, in addition to other countries of the world.
The views and opinions expressed in this article are those of the author and do not necessarily reflect Sputnik's position.