Etla: The situation in Iran has a greater impact on oil than Venezuela

The US military operation in Venezuela and significant protests in Iran have been at the center of the oil market at the beginning of the year.

The effect of the situation in Venezuela on the price of oil is likely to be of minor importance, but the situation in Iran can affect prices more, according to a senior researcher at the Finnish Economic Research Institute Etla Ville Kaitilan from drafting from the estimate.

If Iran’s current oil exports under sanctions were to decrease, the world market price could rise somewhat in the short term, Kaitila estimates.

On the other hand, if there was a change of power in Iran and the sanctions were removed, production and exports could increase, which over time would lower the price of crude oil, the release states.

Since the beginning of the year, information about Iran’s internal unrest has raised oil prices due to uncertainty. The situation has apparently had no consequences for the actual oil production, Kaitila writes.

Iran accounts for about four percent of the world’s oil production, which is about four times more than Venezuela. Both are subject to Western sanctions and mainly go to China.

According to Kaitila, the impact of the situation in Venezuela will probably be of minor importance, as the country’s production is currently globally marginal and utilizing the resources would require significant investments.

In addition, based on the publicity, the break-even point is probably relatively high, around 80 dollars per barrel. When the current market price is around USD 60 per barrel, significant investments will wait, Kaitila writes.

Ukraine’s drone strike in the Black Sea, which affects Kazakhstan’s oil exports, has also affected prices.