22 October 2018

Nigeria: Khashoggi - Uncertainty Looms in Global Oil Market As Saudi Contains Outrage

Photo: CIO East Africa
(File photo).

The International Energy Agency (IEA) Monday on said it is not worried Saudi Arabia will cut oil supply in response to any potential sanctions over the killing of journalist Jamal Khashoggi.

IEA chief, Fatih Birol, however told Reuters that analysts and industry stakeholders must deploy 'common sense' as political developments may impact energy markets.

On October 2, Mr Khashoggi, a critic of the Saudi political establishment, was reportedly killed at the Saudi consulate in Istanbul, Turkey. The reported death has in the last few weeks sparked a global outcry.

The journalist was last seen entering the Saudi consulate in Istanbul.

The Saudis, under intense pressure to explain Mr Khashoggi's whereabouts, have offered conflicting accounts. They initially said he had left the building unharmed on 2 October but on Friday admitted for the first time he was dead, saying he had been killed in a fight. This claim met widespread scepticism.

On Monday, when asked about the uncertainty surrounding Saudi's politico-economic relationship with the rest of the world, Mr Birol said the issues may affect the global oil market.

"There are many geopolitical, non-energy related issues, which could also have further impact on the oil markets," he told Reuters.

In the last few days, analysts have expressed concerns in oil markets over whether Saudi Arabia, the world's biggest crude oil exporter, might retaliate against any punitive measures by global powers over Mr Khashoggi's death.

"There's a strong challenge for the key producers to increase production and comfort the markets," Mr Birol explained further. "I appeal to all the producers and consumers to have common sense in the very difficult months we are entering."

Speaking on the sidelines of an LNG conference in Nagoya, Japan, the IEA chief said he did not think that Saudi Arabia would cut production. He added, however, that there are "significant worries" about the market because of falling supply from Venezuela and Iran amid strong demand growth.

"There is potential we will see even higher prices than current ones and it comes, as it always does, at a bad time for the global economy," he said.

Meanwhile, Saudi Arabia has said that it has no intention of unleashing a 1973-style oil embargo on Western consumers and will isolate oil from politics.

"There is no intention," Saudi Energy Minister, Khalid al-Falih, told Russia's TASS news agency when asked if there could be a repetition of the 1973-style oil embargo on Monday.

Top U.S. lawmakers took turns to chastise Saudi Crown Prince Mohammed bin Salman on Sunday and said they believed he ordered the killing of Mr Khashoggi. Several U.S. lawmakers have suggested imposing sanctions on Saudi Arabia in recent days while the kingdom, the world's largest oil exporter, has pledged to retaliate to any sanctions with "bigger measures".

"This incident will pass. But Saudi Arabia is a very responsible country, for decades we used our oil policy as responsible economic tool and isolated it from politics," Mr al-Falih said.

"My role as the energy minister is to implement my government's constructive and responsible role and stabilizing the world's energy markets accordingly, contributing to global economic development."

The Saudi official said that if oil prices went up, it would affect global economy and trigger economic recession. He explained however that with Iranian sanctions coming into full force next month, there was no guarantee oil prices would not go higher.

When asked if the world can avoid oil prices hitting $100 per barrel again, he said he cannot give a guarantee because he cannot predict what would happen to other suppliers.

He said, "We have sanctions on Iran, and nobody has a clue what Iranians export will be. Secondly, there are potential declines in different countries like Libya, Nigeria, Mexico and Venezuela.

"If 3 million barrels per day disappears, we cannot cover this volume. So we have to use oil reserves," he said.

The minister also disclosed that Saudi Arabia would soon raise output to 11 million barrels per day (bpd) from the current 10.7 million, adding that global supply next year could be helped by Brazil, Kazakhstan and the United States.

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