Oct. 24–The resumption of U.S. sanctions on Iran will add “significant uncertainty” to price forecasts for crude oil and gasoline in 2019, the U.S. Energy Information Administration said Wednesday.
The agency expects international oil prices to increase to an average of $81 a barrel in the fourth quarter before falling to an average of $75 a barrel in 2019. But it noted that the effect of the sanctions, set to resume Nov. 4, could have substantial effects on prices for both oil and gasoline if the oil market tightens as a result.
The sanctions are expected to curtail Iran’s oil production and exports. The agency anticipates Iran’s average crude oil production, excluding condensate, to fall by about 1 million barrels a day next year, down from 3.8 million barrels a day in April 2018.
Meanwhile, it expects OPEC’s spare production capacity to fall to 1.3 million barrels a day next year, down from 1.6 million barrels a day this year. That would create a tighter market amid falling production in Iran and Venezuela, which face political and economic crises.
However, the agency noted that it remains uncertain how other producers will compensate for lower supplies from Iran.
“Significant differences between any potential production response and the actual volumes taken off the market would likely result in increased price volatility,” it said.
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