I was in Dubai on Sept. 20-21, not to watch the Asia cup in the Dubai cauldron (temperature was reaching 41 degrees when I landed on the afternoon of the 20th) to give a speech at the Treasury and Money Managers’ offsite of the Aditya Birla Group. I listened to some excellent presentations by Mr. Bahram Vakil on the Insolvency and Bankruptcy Code, by Ms. Amrita Sen of ‘Energy Aspects’ on the oil price dynamics and by Rajdeep Sardesai on the 2019 elections.
The oil price supply situation remains tight. Saudi Arabia is not pumping as much as they claim that they could. It is only about 10.5 million barrels per day. They claim to have the ability to pump out 12 million barrels per day. But, they are not. There is a risk that oil price could temporarily spike to the three-figure mark in the fourth quarter.
While electric vehicles are only making slow progress, the oil industry has not invested much in exploration or in distribution. At the same time, demand had almost touched 100 million barrels of crude oil per day in 2017 – some eight years ahead of earlier projections. Here is the latest IEA report that backs this up. Third and fourth quarter demand in 2018 is quite high, topping 100 mbpd in the fourth quarter.
With the American administration serious about its sanctions on Iran, there is the potential for a 2 mbpd shortfall in the fourth quarter. See Bloomberg story here.
This does not sound like good news for India.