Expert: Reduction in spare capacity may lead to volatility of oil price

Baku. 10 October. REPORT.AZ/ With reduced spare capacity, oil producers will become less capable to respond to future oil demand. This will create a tighter supply and demand dynamic in the oil market which in turn will add to volatility of the oil price, Abdulaziz Aldosari, a researcher at the Bahrain center for Strategic Studies and Energy, told Report.

"The current oil price fluctuations are due to the upcoming US sanctions on Iranian crude oil exports. The oil market is yet to discover the amounts of crude oil Iran will be able to export mainly to India and China, and to a lesser extent to other countries," he said.

According to him, OPEC led by Saudi Arabia along with Russia are working on achieving 100% compliance level for the OPEC/Non-OPEC agreement: "And as a result of declining Iranian oil exports, achieving 100% compliance has become a more challenging task. Increased production by Saudi Arabia (plus other Gulf States) and Russia will result in a decline in their spare oil production capacity which will add to volatility of the oil price."

Abdulaziz Aldosari, a researcher at the Bahrain center for strategic studies and energy

There is a downside risk for oil price associated with US-China trade war and slowdown in global economic growth that could hit demand.

Əbdüləziz Əldosari

Bəhreynin Strateji, Beynəlxalq Enerji Araşdırmaları Mərkəzinin tədqiqatçısı Əbdüləziz Əl Dosəri

Touching upon whether oil price will or not stabilize, the expert said: "Until US sanctions take effect next November and we see how Iran would react, it will be very hard to predict the oil price tendency and how it might stabilize. But generally speaking from market fundamentals perspective, market supply seems heading towards tightness."